EU states express doubts over carbon offset ban


European Union member states may oppose new rules on how far their factories and power plants can offset their carbon emissions, to be proposed by the European Commission, environment ministries told Reuters.

The EU executive is expected to propose in the next two weeks curbs or an outright ban from 2013 on the most common types of offsets.

Europe's emissions trading scheme caps planet-warming gases emitted by industry, but allows companies to offset emissions by paying for carbon cuts in developing countries, as a cheaper alternative to cutting their own.

Shutting the main supply of offsets could push up carbon prices, if agreed by a majority of member states at a meeting of Commission officials and environment ministers later this month.

"From Poland's perspective, of course, the key problem are those installations which have to buy enormous amounts [of offsets]: price hikes would be problematic for them," said Urszula Allam-Pelka, an official at Poland's environment ministry.

Allam-Pelka did not say that Poland would oppose a ban. East European countries including Poland have previously disputed their carbon caps, seeing these as a handcuff on economic growth.

The Commission questioned in August the environmental integrity of projects, mostly in China and India, which destroy a greenhouse gas by-product called HFC-23.

Such HFC projects accounted for about 60% of offsets imported into the EU emissions trading scheme last year, according to the Sandbag environmental group.


An EU-wide decision will be made by majority vote, requiring at least 14 of the bloc's 27 countries, later this month. Several countries were still undecided.

"There is not yet a unified line by the German government," said a German environment ministry spokesman. The environment ministry had sympathies with the EU plan but a joint stance must be agreed with for example the economy ministry, he added.

An official at Spain's environment ministry said: "We consider it essential to guarantee a suitable transition that does not put in question the security of trading and carbon markets."

A UK energy and climate ministry spokesperson said: "We welcome the Commission taking a proactive role in this area."

A spokesman for the Czech environment ministry said that they could support a ban. "The Czech Republic supports in principle this step – a limitation or a ban. It will of course depend on the concrete form of the measures," said Petr Kucera.

One possible alternative to a ban may be to discount HFC credits – for example making each worth half a carbon offset.

Italian industry sources said that they supported in general the replacement of HFC credits, but that it would be impossible to put that in place by the end of 2012, which they said would put at risk more than 200 million tonnes of credits.

The Italian government appeared to be supporting their position, the industry sources said. There was no immediate comment from Italy's environment ministry.

An HFC ban would likely irritate developing countries, and especially China, home to many such projects.

UN climate talks resume later this month in Cancún, Mexico, and are deadlocked for example on how far rich countries should pay for emissions cuts in the developing world. The Kyoto offset scheme has been the main source of carbon finance so far.

(EURACTIV with Reuters.)

Under the Kyoto Protocol, industrialised countries can meet part of their climate targets by investing in carbon reduction projects in developing countries.

The arrangement, called the Clean Development Mechanism (CDM), operates on the condition that projects generating credits have to ensure "additionality", or the principle that the reductions they achieve would not have occurred without the incentive of foreign finance.

In August, the European Commission announced that it is preparing measures to limit the use of credits from industrial gas projects generated under the CDM in its emissions trading scheme (EU ETS).

The move followed concerns that some projects destroying a potent greenhouse gas HFC-23 have artificially increased its production as companies seek to cash in on more credits.

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