European Union Starts Debate on Quality Limits, Multipliers on CO2 Offset

The European Union will soon start a debate on banning some carbon offset credits used for compliance in the bloc’s emissions-trading system and introducing tighter quantity limits, a senior EU official said.

The European Commission, the EU’s regulatory arm, may propose that quality limits should be imposed on certain credits and will launch a discussion on applying a discount known as a multiplier on some types of offsets issued under the United Nations carbon program, said Yvon Slingenberg, emissions-unit head in the commission’s climate directorate.

“We’ll start a debate with stakeholders shortly on restricting the quality of offsets,” Slingenberg said in an interview today at a carbon forum in Cologne, Germany. “At the same time we will also discuss multipliers as an option.”

The commission said in an analysis yesterday that projects related to two industrial gases -- hydrofluorocarbon-23 and nitrous oxide - create significant windfall profits.

HFCs, emitted in the production of chemicals for air conditioning and refrigeration, gained favor in the 1970s as an alternative to chlorofluorocarbons, which scientists linked to depletion of the ozone layer. While HFCs don’t interfere as much with the earth’s shield against damaging sunrays, they trap heat and contribute to global warming.

About half of the 414.2 million Certified Emission Reduction credits issued since October 2005 by the UN’s Clean Development Mechanism, the second-largest emissions market, stem from plans to cut HFCs, according to UN data.

Climate Target

The Brussels-based commission also said yesterday that the 27-nation EU could use a multiplier on carbon offset from some nations and certain greenhouse reduction projects as a way to move to a more ambitious climate target. The decision whether to toughen the emissions-reduction goal to 30 percent in 2020 compared with 1990 levels from the current 20 percent is in the hands of EU leaders. The bloc has said it’s ready to do so if other nations follow suit.

Multipliers could be introduced for acceptance in the EU emissions trading system of CDM credits from countries “which do not participate adequately in international climate efforts,” according to the commission. This could take the form of a requirement to surrender two CDM credits, instead of only one, per metric ton of CO2 emitted in the EU program, it said yesterday.

“The introduction of multipliers or quality restrictions is an option that the EU could use even before member states’ decision on more ambitious climate goals,” Slingenberg said. “Any restrictions would start to be binding between 6 and 36 months after they have been approved. Realistically, any changes shouldn’t come into force before 2012.”

To contact the reporter on this story: Ewa Krukowska in Cologne at ekrukowska@bloomberg.net

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