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EU to Study CO2-Abuse Shields, Mulls HFC-Offsets Ban (Update1)
2010-10-28 11:32:10.739 GMT
(Adds CO2 price, EU comments from the 10th paragraph.)
By Ewa Krukowska
Oct. 28 (Bloomberg) -- The European Union's carbon program
may stop allowing use of industrial-gas-related credits from the
United Nations as soon as 2013, and the bloc plans to analyze
oversight of its emissions market next year.
"The commission is considering restrictions on certain
types of project related to industrial gases HFC-23 and nitrous
oxide," Yvon Slingenberg, emissions-unit head at the European
Commission's climate department, said in an interview yesterday
in Brussels. "An outright ban is one of the options."
The commission, the EU regulator, has said that UN credits
from reducing hydrofluorocarbons and nitrous oxide create
"significant windfall profits" and may undermine the
environmental integrity of the market. UN offsets can be used
for compliance in the EU's emissions-trading systems as long as
they ensure "real, verifiable, additional and permanent"
emission reductions, Slingenberg said.
"The proposal is in internal consultation," she said.
"We need to come to a final decision within the commission now,
and then the proposal will be presented to member states."
EU emission allowances for December 2012 fell 0.6 percent
to 15.82 euros ($21.90) a ton today and UN credits for that year
also lost 0.6 percent, trading at 12.10 euros. Carbon traders
have said delays by UN regulators in issuing offsets may leave
them with unusable credits for 2012 should the EU curbs come
into force at the beginning of 2013.
One-for-One
Regulators of the UN carbon program, the Clean Development
Mechanism, are also 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 are assessing whether the
methodology for awarding those offsets should be changed.
UN offsets, or Certified Emission Reductions, are awarded
on projects that lower emissions in developing nations. They can
now be swapped one-for-one with permits in the EU's cap-and-
trade program, the world's largest carbon market.
The earliest possible date for any restrictions on offsets
credits in the EU program is Jan. 1, 2013, according to the
bloc's law. The current trading period in the EU emissions
trading system, or ETS, ends in 2012, and the deadline for
surrendering allowances for that year is the end of April 2013.
"The fact that the compliance deadline for 2012 is in 2013
will be something that we will look at," Slingenberg said. "But
policy makers can also decide that you can no longer use
the credits from January 2013. April is the ultimate surrender
deadline, but operators can hand in the credits earlier, e.g. in
December 2012."
Advance Notice
The date when certain credits "will no longer be usable
will be known in advance," Slingenberg said. "If we make a
proposal now before the end of the year and it's approved within
a couple of months, markets will have two more years to make use
of their credits."
Changes in EU policy wouldn't prevent investors from using
restricted credits elsewhere, and the commission may decide it
isn't responsible for terms of investor contracts.
"If a credit is for delivery in 2012, you should have it
delivered by the end of 2012," Slingenberg said. "If it
doesn't happen, that's a separate contractual issue. Why should
we take the blame for it?"
The planned commission proposal will require EU member
states approval to become binding. Climate Commissioner Connie
Hedegaard, who has also called for international action to phase
out the production of hydrofluorocarbons, said on Oct. 15 the
bloc's nations will likely support curbs on the use of offsets
from industrial gases in the EU emissions program.
'Large Share'
The EU is also planning to study the oversight of its carbon
market to gauge whether further measures are needed to ensure
spot trading is well-protected from abuse, Slingenberg said.
"The financial market rules already apply to a large share
of the carbon market, offering the maximum level of protection
one could think of today," she said. "The gap is spot trading
and over-the-counter markets. We'll do a further analysis next
year to better assess the risk."
The bloc already toughened its emissions-system regulation
in April, after a sale of offset credits already used for
compliance in the European market halted spot trading for three
days in March.
"We need to see if the gap is important enough to put in
place some measures, and if so, what measures should that be to
keep in mind the proportionality between obligations, i.e.
costs, and benefits," Slingenberg said.
The commission will present a communication on the current
level of market protection to the European Parliament and EU
member states by the end of this year, according to Slingenberg.
This will be followed by a stakeholder consultation and a cost-
benefit analysis, she said.
For Related News and Information:
Emission market news: NI ENVMARKET <GO>
Today's top energy stories: ETOP <GO>
European power-markets home page: EPWR <GO>
--Editor: Mike Anderson, Jonas Bergman.
To contact the reporter on this story:
Ewa Krukowska in Brussels at +32-474-620-243 or
ekrukowska@bloomberg.net;
To contact the editor responsible for this story:
Stephen Voss at +44-20-7073-3520 or sev@bloomberg.net
