Carbon Market Watch

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WATCH THIS! NGO Newsletter #7: Reality Check: Offsets in EU’s Climate Legislation

07 Nov 2013

Watch This! PDF (English)

The European Union will easily meet its Kyoto climate targets for 2020, the annual report of the European Environment Agency (EEA) shows. While this is good news on the one hand, the report also shows that the EU has missed on a huge opportunity to boost domestic action. As EU policy makers are currently debating the design of EU’s Climate Framework for the period 2020-2030 it is time to draw the line and take stock of EU’s offsetting experience.

Offsets were established as a cost effective tool to mitigate greenhouse gas (GHG) emissions and comply with climate targets. However, it is a zero sum game for the climate allowing companies and governments to count the emissions ‘saved’ through investments in offsetting projects towards climate obligations. In the EU, the large quantity of offset credits allowed until 2020 bought governments and companies’ way out of climate protection ensuring a minimum of environmental standards.

International Offsets Have Undermined EU’s Climate Policy

The EU’s Emission Trading Scheme is considered the pillar of EU climate policy and the largest market for emission permits in the world.  Currently, the EU ETS suffers from record low allowance prices, a massive oversupply and very low demand. The economic recession combined with an over allocation of pollution permits rendered the quantity limit for offset credits too generous and consequently disrupted the functioning of the carbon market. According to the European Commission report “The state of the European carbon market”

the use of international offsets in the EU ETS has almost doubled the oversupply in the period 2008-2011 and is estimated to amount to three quarters of the oversupply by 2020

The EU’s Effort Sharing Decision (ESD) ensures that the EU’s greenhouse gas (GHG) target for 2020 islegally binding for Member States and economy wide in scope. It covers transport, buildings and agriculture sectors accounting for almost 60% of EU’s GHG emissions.

In October, the European Environment Agency (EEA) released its annual report “Trend and projections in Europe 2013” which shows that Member States are on track to fulfil their Kyoto commitments and will over-achieve the 20% reduction target by 2020 just with measures already in place. The report shows that reaching EU climate targets was possible and much easier than planned. However, the current rate of progress is far from enough to achieve 80-95% reduction by 2050.

Moreover, numerous offset projects have been criticised for not achieving sustainability benefits, their declared secondary goal. The UNFCCC has so far failed to address evidence about CDM projects linked to human rights abuses. More generally, the CDM keeps supporting unsustainable technologies, such as coal power plants and large hydro projects.

To draw on the lessons learnt, we have published a new policy brief “The Elephant in the Room: International Offsets in EU’s 2020 Climate Legislation” available here. To set the stage for a healthy climate and energy framework for the period 2020-2030, Carbon Market Watch recommends that:-          offset credits from following project types be banned for use in both the EU-ETS and the ESD for the period from 2013 – 2020:

  • Industrial gas projects that destroy HFC-23 and N2O from adipic acid production
  • Large-scale power projects, including hydropower, wind power, natural gas, and coal power
  • JI track 1 projects

–          Moreover, a do-not harm assessment should be introduced that suspends offsetting projects in case of evidence of human rights abuses.

–          A future EU climate framework for the period post-2020 must be based on domestic emissions reductions only.

 

By Adela Putinelu, Policy Assistant, Carbon Market Watch