Brussels, 21 January 2011
Emissions trading: Commission welcomes vote to ban certain industrial gas credits
The European Commission welcomes today's vote by Member States to ban from use in the EU Emissions Trading System (EU ETS) emission offset credits from certain projects which destroy industrial gases. Essentially, the ban means that companies will be able to use these credits for 2012 compliance under the EU ETS until 30 April 2013, but not thereafter.
Connie Hedegaard, Commissioner for Climate Action, said: "I very much welcome the Committee's decision to back this Regulation, less than 5 months after I first proposed the idea. These projects raise concerns relating to their environmental integrity, value-for-money and geographical distribution. Not only are some of these credits of doubtful value, continuing to use them is also not in the EU's interest as doing so could discourage host countries from supporting cheaper and more direct action to cut these emissions. Our aim is not to reduce the number of credits available but to ensure the international carbon market is based on a better quality and distribution of credits."
The EU Climate Change Committee, which brings together representatives of the 27 Member States, voted for the ban today on the basis of a proposal tabled by the Commission last November (see MEMO/10/614).
The ban will apply to projects which destroy two industrial gases: trifluoromethane (HFC-23) produced as a by-product of chlorodifluoromethane (HCFC-22) production, and nitrous oxide (N2O) from adipic acid production. HFC-23 and N2O are both powerful greenhouse gases which contribute to climate change.
Just 23 such industrial gas projects account for two-thirds of all the credits generated through the Kyoto Protocol's Clean Development Mechanism (CDM). Most such projects are undertaken in China and other advanced developing countries. The ban on the use of such credits in the EU ETS will apply to all such projects undertaken under the CDM as well as any undertaken in developed countries through Kyoto's Joint Implementation mechanism (JI).
What is the problem?
The acceptance of credits from industrial gas projects has been controversial for some time. The main concerns are:
In addition to these specific concerns, the EU wants to see the CDM progressively phased out for the advanced developing countries. It should be replaced by new mechanisms that would cover whole sectors and thus tap much greater potential for emission reductions than the project-based CDM. Unlike the CDM, these sectoral mechanisms would generate international credits only if the sector achieved a pre-determined emissions performance threshold. The existing EU legislation already provides that credits from new projects registered after 2012 can only be used in the EU ETS if the projects are located in Least Developed Countries (except where otherwise agreed through future international or bilateral climate agreements).
The European Parliament now has three months to comment on the proposal, after which the Commission will formally adopt it. The restrictions will apply from 1st May 2013, giving market participants sufficient time to adapt.
The CDM enables governments and companies in developed countries to invest in emission-saving projects in developing countries in return for credits which can be used to offset their own emissions. The JI mechanism does the same, except that JI projects are undertaken in developed countries.
Questions and answers on the Commission's proposal (November 2010)
For more information on the European Emissions Trading System, see