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Brussels, 25 November 2010
European Commissioner for Climate Action, Connie Hedegaard, announces the submission of a proposal to introduce further quality restrictions on the use of credits from industrial gas projects to the Climate Change Committee. Specifically, the proposed Regulation would provide that from 1st January 2013, the use of JI/CDM1 credits from projects involving the destruction of hydrofluorocarbon 23 (HFC-23) and nitrous oxide (N2O) from adipic acid production is prohibited in the EU ETS.
Connie Hedegaard, Commissioner for Climate Action, said:
"Following my request in August the Commission services have carried out a thorough impact assessment and on this basis prepared a proposal to introduce new quality restrictions on the use of certain international credits. The proposed restrictions on certain industrial gas credits are designed to address several major problems the impact assessment has identified:
Firstly, some industrial gas credits have given rise to concerns about the environmental integrity of these credits and the carbon market at large. I am strongly committed to the further development and expansion of this market and precisely therefore it is critical that we can all have full confidence in the emission reductions that are allowed to be counted in the system, whether they take place in Europe or elsewhere.
Secondly, the current incentive structures work against necessary reforms at the international level. In particular, the lucrative nature of HFC-23 projects appears to discourage countries hosting these projects to support cheaper and more direct action to cut these emissions e.g. through the Montreal Protocol or as part of their own appropriate mitigation actions.
Thirdly, the impact assessment demonstrates that the lowest-cost industrial gas credits which dominate the current market are highly concentrated in a few advanced developing countries. These very countries have pledged to take own action in the Copenhagen Accord. Continued recognition of industrial gas credits would deprive many other, poorer countries of the benefits from the demand generated in the EU ETS. I would like to see a more diverse market for carbon credits, including from projects which bring more sustainable development benefits to the developing countries and communities that host them.
Finally, as the EU prepares to apply strict emission benchmarks to installations emitting industrial gases in the 3rd phase of the EU ETS, we must work to avoid that similar installations located outside the EU receive very significant, unfair competitive advantages through crediting against more generous baselines as this might increase the risk of "carbon leakage" to the disadvantage of both the climate and EU businesses.
In essence the proposed measure is aimed at ensuring a market for better international credits, not fewer credits. In this respect it is worth noting that the impact assessment concludes that the restrictions would have no major effect on the European carbon price.
Overall, adopting these restrictions will provide new and much needed impetus to the reform of UN-based carbon market mechanisms which the EU has long been calling for.
Offsetting EU emissions with reduction credits from international Climate projects is beneficial when the projects make a real contribution to addressing the climate challenge and to sustainable development in the world's poorest regions and countries. With today's proposal we want to ensure that Europe's demand for credits is increasingly focused on such projects.
In the light of the above I urge the Climate Change Committee to proceed swiftly and create regulatory clarity on industrial gas credits as soon as possible, so to allow the market due time to adjust to the forthcoming changes.
I would also like to express my gratitude to all stakeholders which have provided feedback on design aspects of the restrictions."
Once the proposed measure has received a positive vote in the Climate Change Committee (consisting of Member State representatives) it will be subject to a 3 month scrutiny period by the European Parliament, after which it will be formally adopted by the European Commission.
The EU already applies use restrictions on credits from projects in nuclear facilities and projects from Land Use and Land Use Change and Forestry (LULUCF) activities.
More information is available at:
Use of credits from the Joint Implementation and Clean Development Mechanism in the EU's Emissions Trading Scheme (EU ETS) post-2012