EU Proposes Lowest Allowed Limit for Imported Carbon Credits

The European Union’s regulatory arm proposed to set the quota for international carbon credits at the lowest level allowed by law after imports aggravated a record glut of permits in the EU emissions-trading system.
Participants in the world’s biggest carbon market will be entitled between 2008 and 2020 to use United Nations’ credits totaling up to 11 percent of the EU permits granted to them for free in 2008-2012, according to a draft regulation published by the European Commission yesterday. They may also opt to choose as the limit the amount of imported credits allowed under national permit allocation plans for 2008-2012, if it is higher.
The commission decided not to use an option provided for in the EU emissions law to allow additional imports of UN credits, according to the draft sent to member states for consideration. Climate experts from national governments are set to discuss the measure at their next meeting in Brussels later this month, the commission said.
“The total EU ETS import limit for 2008-20 will probably be lower than our current estimate,” Richard Chatterton, an analyst at Bloomberg New Energy Finance, said by e-mail yesterday. “The exact import limit is unlikely to be known until end-2013 as it will take several months for the new regulation to come into force and for member states to calculate the revised import limit for each installation.”
Power Plants
About 12,000 factories and power plants in the EU emissions-trading system, or ETS, are allowed to use UN offsets as a cheaper way of compliance with their pollution quotas. Emitters imported more than 1 billion credits in 2008-2012, boosting oversupply in the European carbon market to about 2 billion tons, a level that’s almost equal to annual pollution caps in the system, according to EU data.
EU allowances for delivery in December lost as much as 1.8 percent to 3.84 euros a metric ton and were at 3.89 euros on the ICE Futures Europe exchange as of 7:49 a.m. in London. The contract fell to an all-time low of 2.46 euros last month.
UN Certified Emission Reductions for this year dropped 4.8 percent yesterday to 40 euro cents, compared with a record low of 20 euro cents on April 17. CERs are created from projects in developing countries under the UN’s Clean Development Mechanism.
Emitters that entered the EU ETS after 2008 and those in sectors included in the ETS after 2012 would be able to use international credits up to 4.5 percent of their verified emissions during the 2013-2020 period, the commission proposed.
Emission Curbs
The offset limit for airlines, which become subject to EU emission curbs last year, would be 1.5 percent of their verified emissions in the third phase of the cap-and-trade program, which started this year and will run through 2020, according to the draft regulation.
The proposal needs approval by national officials in the Climate Change Committee, followed by a three-month scrutiny by the European Parliament and EU ministers, to enter into force.
“Member states would then have one month to calculate and notify to the European Commission the international credit entitlement for each of their operators in accordance with the limits set in the regulation,” the commission said.
Bloomber, JUne 6, 2013