Carbon Market Watch

For fair and effective climate protection.

Open Letter to EU Member States Regarding the use of Offsets in the EU ETS

15 May 2012

On May 15th 2012, CDM Watch sent an open letter to European environment ministers to ask them to restate their commitment in ensuring higher environmental integrity in carbon offsets.

5 September 2012: download responses below

Dear Minister,

The latest data from the European Commission shows that 555 million carbon offset credits were surrendered into the EU Emissions Trading Scheme (ETS) from 2008 – 2011, representing an estimated spend of €5.9bn.

The signatory organisations would like to express their serious concern about the use of carbon offsets – both within the EU ETS and the Effort Sharing Decision (ESD) – that threaten the European Union’s climate goals. In particular, we are concerned about the following:

1) The Role of offsetting in the EU ETS: international offsets should not stifle domestic reductions. Given the current oversupply of allowances in the EU ETS, the use of offsets is exacerbating a low carbon price and channelling investment out of Europe at a time when inward investment is needed.

Ø Does Bulgaria agree that stricter rules are needed to ensure that carbon offsets do not stifle domestic action?

2) Coal in the CDM: the EU provides financial support to coal-fired power plants in China and India through the CDM. CDM coal projects are not more efficient and therefore represent business-as-usual. They lock in hundreds of millions of CO2 emissions for decades to come and cause severe human health and ecosystem damage.  Using international credits from coal-fired power stations for EU compliance risks severely undermining the environmental integrity of the EU`s climate policies.

Ø Does Bulgaria support the urgent need to prevent coal offsets being used to count towards Europe’s climate ambition?

3) Large Hydro in the CDM: Despite delivering renewable energy, large hydro projects in the CDM fail to reduce emissions because they are business-as-usual. A recent study provides evidence that the vast majority of these projects would have been built regardless of CDM financial support. Furthermore, large hydro projects can have severe negative social and environmental impacts. The recent Study on the Integrity of the CDM by the European Commission singles out large hydro power projects as particularly problematic. Given that such offsets replace real emission reductions in the EU, the use of credits from business-as-usual CDM projects directly undermines the EU’s domestic emissions reduction target.

Ø Which concrete steps will Bulgaria take to address the problems with CDM large hydro projects as outlined above?

4) Track 1 Joint Implementation: JI is currently divided into two “tracks”. Under Track 1, it is the host Parties that approve projects and the verification of emission reduction and issuance of credits (ERUs). Track 1 projects are notorious for their lack of transparency, accountability and environmental integrity.  These shortcomings are outlined in the JISC recommendations and also in a recent report commissioned by the European Commission. Eight times more ERUs have been issued under Track 1 than under Track 2 (107million versus 13million). ERUs are shadowed by AAUs which means those countries with large AAU surplus’s can use track 1 JI for “hot-air laundering.” This undermines environmental integrity and threatens the viability of carbon markets.

Ø Which concrete steps will Bulgaria take to address the problems with Track 1 JI projects?

We look forward to hearing from you regarding your position on the issues outlined above.

Yours sincerely,

Wendel Trio Director CAN Europe

Eva Filzmoser Director CDM Watch

Clare Perry Senior Campaigner Environmental Investigation Agency

Magda Stoczkiewicz Director Friends of the Earth Europe