Environmental Lobby Urges EU to Ban UN Carbon Offsets After 2020

March 13th, 20136:13 am @

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The European Union should ban the
use of United Nations-approved carbon offsets from its
emissions-trading system, or ETS, by 2020, an environmental
group said in a submission to the European Commission.

Regulators should also restrict the use of some other
carbon credits “as soon as possible” to help tackle a glut of
permits in the bloc’s carbon market, according to Carbon Market
Watch, an environmental lobby group based in Brussels.

“The use of Kyoto offset credits in the EU ETS was
originally meant to be a cost-containment tool to allow ETS
operators to choose the most cost-effective manner for
greenhouse gas abatement at company level,” the group said in
the submission to the European Commission dated Feb. 28 and
published on its website. “Exceptional macro-economic
developments and the fact that emissions have been substantially
lower than the cap rendered the quantity limit of international
credits in the period 2008 to 2020 too generous.”

Carbon has plunged more than 85 percent in the past five
years as the euro area’s second recession since 2008 cut
industrial demand for permits. The market’s surplus almost
doubled to 887 million tons last year, Bloomberg New Energy
Finance in London estimated on Feb. 4. Preliminary data for 2012
will be published in April.

Emissions Cutting

UN Certified Emission Reductions were unchanged at 34 euro
cents a ton on ICE Futures as of 3:10 p.m. London time. They
fell to a record 28 euro cents on Jan. 21. Prices for EU
allowances for December gained 1.7 percent to 4.74 euros ($6.16)
a metric ton on London’s ICE Futures Europe exchange.

The use of UN offsets will represent nearly two-thirds of
the market’s surplus by 2020, Carbon Market Watch said. By
removing their eligibility after 2020, the EU would encourage
allowance prices to rise, enabling more emissions cutting in
Europe, it said. The so-called Phase 4 of allowance trading
starts in 2021.

“In order to create the necessary scarcity in Phase 4,
external international credits must be avoided,” the group
said.

The European Commission is seeking public comment on a
report outlining options for long-term changes to its emissions
market to tackle oversupply and low permit prices.

To contact the reporter on this story:
Alessandro Vitelli in London at
avitelli1@bloomberg.net

To contact the editor responsible for this story:
Lars Paulsson at
lpaulsson@bloomberg.net

Article source: http://www.businessweek.com/news/2013-03-04/environmental-lobby-urges-eu-to-ban-un-carbon-offsets-after-2020