UPDATE 2-EU nears carbon offset plan, govts express doubts
* EU Commission wants ban on main carbon offset types
* Likely to rile China, other developing nations
(Adds sources on draft proposal)
By Pete Harrison
BRUSSELS, Nov 3 (Reuters) - The European Union's executive Commission wants to ban from 2013 the most common types of carbon offsets used by factories and power plants, to boost the credibility of its emissions trading scheme, two EU sources said.
Some EU goverments may oppose the plan, which requires majority approval by member states, environment ministries and industry sources told Reuters.
"The early draft proposal covers three main gases -- Adipic acids, nitrous acids and HFC 23," one EU source said on condition of anonymity. "They are trying to keep it simple so it would be a strict ban."
The EU Commission will propose the ban in the next two weeks, and not before Nov. 11, the source added.
Europe's emissions trading scheme caps planet-warming gases emitted by industry, but allows companies to offset emissions by paying for carbon cuts in developing countries, as a cheaper alternative to cutting their own.
The majority of the disputed carbon offsets are generated in newly industrialised countries such as China and India and the European Commission aims to reform the scheme to include more projects from the least developed countries.
The Commission also worries that the current system lures industrial investment away from the EU towards developing countries where they can earn the lucrative credits.
Shutting the main supply of offsets could push up carbon prices, if agreed by a majority of member states at a meeting of Commission officials and environment ministers later this month.
The EU Commission questioned in August the environmental integrity of projects, mostly in China and India, which destroy a greenhouse gas by-product called HFC-23. [ID:nLDE67O1ZK]
Such HFC projects accounted for about 60 percent of offsets imported into the EU emissions trading scheme last year, according to the Sandbag environmental group.
EU states were unsure whether they supported a ban. For some Polish companies: "(carbon) price hikes would be problematic," said Urszula Allam-Pelka, an official at Poland's Environment Ministry, who didn't say that Poland would oppose a ban.
The International Emissions Trading association (IETA) says it wants the Commission to perform a a serious economic analysis on impacts, long and short-term, not only on market prices but on market confidence.
IETA also urges the Commission to avoid drafting any measures which might look unfairly retroactive, thus scaring investors away.
Germany did not yet have a position, said a German environment ministry spokesman. The environment ministry had sympathies with the EU plan but a joint stance must be agreed for example with the economy ministry, he added.
An official at Spain's environment ministry said "a suitable transition" was needed.
Similarly, Italian industry sources said a ban couldn't be put in place by the end of 2012. The Italian government supported their position, they said. There was no immediate comment from Italy's Environment Ministry.
Britain supported a reform of the carbon offsetting scheme, which is regulated under the U.N.'s Kyoto Protocol. A spokesman for the Czech environment ministry said that they could "in principle" support a ban.
A ban would likely irritate developing countries, and especially China, home to many such projects.
U.N. climate talks resume later this month in Cancun, Mexico, and are deadlocked for example on how far rich countries should pay for emissions cuts in the developing world. The Kyoto offset scheme has been the main source of carbon finance so far.
(Writing by Gerard Wynn; reporting by Nina Chestney and Karolin Schaps in London, Gabriela Baczynska in Warsaw, Martin Roberts in Madrid, Svetlana Kovalyova in Milan, Michael Kahn in Prague, Vera Eckert in Frankfurt; editing by William Hardy and Keiron Henderson)
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