EU Waits to Set Limits on UN Carbon Offsets as Lobby Urges Fast Action
CO2 Offsets
Philippe Huguen/AFP/Getty Images
Smoke billows from the chimneys of a food industry factory in Santes near Lille, northern France.
Smoke billows from the chimneys of a food industry factory in Santes near Lille, northern France. Photographer: Philippe Huguen/AFP/Getty Images
The European Union is waiting with a proposal that may restrict United Nations carbon credits in its cap-and-trade program as the lobby group for emission traders urges a quick decision.
The European Commission, the EU’s regulatory arm, is concerned that credits related to the industrial gases hydrofluorocarbon-23 and nitrous oxide may be generating “windfall” profits for some developers, it said in a May report. The bloc is considering discounting and other restrictions on some types of offsets issued under the UN’s Clean Development Mechanism.
“These concerns have not resulted in any concrete proposal yet, and we have not taken any formal decision whether that should be the case,” the commission said today in an e-mail. “It’s connected to what’s happening in the international negotiations as well, as we are following the work that is taking place in the CDM executive board.”
Regulators of the CDM are ramping up scrutiny after allegations that some developers are seeking excessive credits related to HFC-23, an industrial gas whose warming potential is 11,700 times more powerful than carbon dioxide. They announced reviews of six HFC projects this month to assess whether the methodology for awarding those offsets should be changed.
The International Emissions Trading Association, a Geneva- based lobby group for carbon traders, asked yesterday for a meeting with EU Climate Commissioner Connie Hedegaard and requested more certainty from the commission about the use of UN offsets through 2020. Private investors “urgently” need certainty to regain confidence in the CDM, and the commission should wind down the debate, IETA said.
Supply Concerns
UN Certified Emission Reductions for December 2010 are up 9 percent this month on speculation that the UN clampdown will restrict the supply of credits. CERs, awarded on projects that lower emissions in developing nations, currently can be swapped on a one-for-one basis with EU permits in the bloc’s carbon market.
The 27-nation EU seeks to cut greenhouse gases by one-fifth by the end of this decade compared with 1990 levels. The bloc has said it may boost that target to 30 percent should other countries follow suit. The next round of international talks on climate change starts Nov. 29 in Cancun, Mexico.
The European Union’s cap-and-trade program, the world’s largest, covers more than 12,000 facilities that produce energy or goods ranging from paper to cement. Emitters must have an allowance for each ton of carbon dioxide they emit in burning fossil fuels. Those producing more than their allowance must buy more; those that emit less can sell their surplus.
Continuing Debate
While the commission can put forward a proposal to impose quality limits or multipliers on UN credits eligible for compliance in the EU emissions trading system, it would require member states approval to become binding.
“Ultimately, that is a political decision,” the commission said. “There have been discussions in the working party on environment also about these aspects, and there were diverging views on whether quality restrictions that were suggested would be appropriate or not.”
The debate may be continued at the next meeting of the EU environment ministers on Oct. 14 in Luxembourg. The earliest date that any kind of quality requirements for CDM could be implemented would be Jan. 1, 2013, the commission said. Whether that will impact projects that have already been registered will be open to the debate, it said.
To contact the reporter on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net;
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