The European Union’s regulator said consensus is growing among governments on some elements of a plan to limit the use in its market of certain credits issued by countries that fail to adopt new carbon goals.
The European Commission proposed that emitters in the bloc’s cap-and-trade will be barred from holding in their accounts UN-sponsored Emission Reduction Unit offsets issued after April 2013 in relation to carbon cuts made before the end of 2012 in countries without emission targets for 2013-2020, according to a statement updated late today. That would apply to projects which are approved by UN regulators for issuance of credits in a procedure known as Track Two.
European law allows companies in its emissions trading system, or ETS, to use international carbon offsets, including ERUs, as a cheaper form of compliance with their greenhouse-gas reduction quotas.
The proposal was discussed by representatives of national governments in the Climate Change Committee as a draft amendment to the bloc’s carbon registry regulation, the commission said on its website. It didn’t comment on another amendment it was seeking in a draft of the regulation in October, which would bar EU emitters from holding in their accounts ERUs issued after 2012 by countries such as Russia that generate the credits in a procedure overseen by the government, known as Track One.
“A restriction on Track Two ERUs would have an almost negligible impact on EU ETS eligible volume,” Richard Chatterton, an analyst at Bloomberg New Energy Finance in London, said by e-mail today. “Nothing has been mentioned on Track One which maintains the uncertainty over the future eligibility of ERUs from that track, particularly from Russia.”
ERUs for delivery in December ended the day 12 percent lower at 22 euro cents a metric ton on the ICE Futures Europe exchange in London. They fell briefly to a record 15 cents yesterday.
“A formal proposal will now be finalized by the commission and submitted to the Climate Change Committee for a vote,” the commission said. “As soon as it has been submitted, the proposal will be posted on the Commission’s ETS website.”
Emission Reduction Units are generated under the UN Joint Implementation program, which encourages investments in low-carbon energy by industrialized countries in other nations that have emission-reduction goals under the Kyoto Protocol, whose first period runs from 2008 to 2012. The second period will start next year and end in 2020, the UN decided at a climate summit last week in Doha.
JI projects are hosted by some EU nations and countries including Russia and Ukraine. While the EU agreed to adopt targets under the second Kyoto commitment period, Russia declined to sign up to a new set of goals.
UN Certified Emission Reduction credits for December, which are generated under a different program and are not subject to any restrictions under the commission’s proposal, recovered earlier losses and closed 2.3 percent stronger at 44 euro cents.
The commission also proposed at the meeting today that 2012 allowances for airlines, which joined the EU carbon program this year, will be carried over to next trading period starting 2013 as permits for aviation. That clarification was sought by countries including the U.K., which wanted to close a loophole that allows buyers of EU aviation allowances to convert them to regular permits that can be used by factories and power plants from 2013.