Why the EU’s Position on Carbon Markets Matters (Watch this! #1)

By Diego Martinez Schütt, CDM Watch

The European Union (EU) plays a unique role in the CDM: it is its biggest client. The EU Emissions Trading Scheme (EU ETS), which covers 50% of all EU GHG emissions, is the world’s biggest greenhouse gas (GHG) cap-and-trade scheme.

The EU-ETS aims at driving European emissions down by putting a price on GHGs and providing incentives to European industries to invest in low carbon technologies. Unfortunately the system can undermine domestic mitigation strategies because the EU also allows industries to offset a part of their reduction obligations by purchasing credits from emission reductions taking place in developing countries through the CDM. In fact, between 2005 and 2020, half of the EU’s emission reduction commitments can be achieved by purchasing CDM credits. Because these credits are much cheaper than investing in new technologies, about 80% of all CDM credits are purchased by the EU, including questionable credits from project types that are very likely to be non-additional and therefore cause a net increase in global emissions. As CDM’s biggest client by far, the EU is an influential player in the decision-making process of the CDM, including decisions on the quality of its credits and the development of future international carbon markets.

The EU puts environmental integrity high up on its agenda. EU Member States have made a commitment to ensure that the credits they purchase represent real reductions and contribute to sustainable development. The EU set a praiseworthy precedent when all 27 EU Member States decided to ban carbon credits from CDM industrial gas projects (HFC-23 and N2O adipic acid). This ban was a result of an intense campaign led by CDM Watch that presented evidence that emissions from these CDM projects were inflated and artificial. By taking such steps the EU has sent strong signals to the UN’s decision-making processes as well as other Emissions Trading Schemes. Australia and New Zealand have followed suit and also banned these carbon credits.

This is a great example of how small groups of people can make a big difference. This historic success has also motivated us to continue this form of campaigning against other problematic CDM projects types such as large hydro and coal-fired power plants. We hope that it also encourages our friends from fellow organisations to keep up efforts to influence the decision-making processes around international carbon markets.

Pressure on the European Commission as a result of CDM Watch’s lunch debate at the European Parliament on the Integrity of the CDM

On 29 February 2012 CDM Watch organised an event at the European Parliament (EP) in Brussels to highlight the key findings of the European Commission’s (EC) Study on the Integrity of the CDM. The event was co-hosted by four progressive members of the European Parliament from different political groups (conservatives, social-democrats, greens and the left). Participants included EU policymakers, CDM project developers and NGO representatives.

This study was commissioned by the European Commission, which has the power to initiate new legislation in Europe. Although the findings of the study were remarkable and highlighted serious problems with large hydro CDM projects, there was little public information about the study’s release. As a result, many people didn’t know that such a study had been conducted. CDM Watch organised this event to bring the attention of influential policy makers to the results of the study and to ask the European Commission to do something about it. This approach has already triggered concrete action. Four Members of the European Parliament have asked the European Commission to clarify which measures it intends to put in place to address the identified shortcomings of international carbon credits from coal power projects, large hydro projects and JI track 1 projects. The answer is awaited.

More info:

CDM Watch Summary of the EC CDM Integrity study

‘Why Coal projects in the CDM undermine Climate goals’ – CDM Watch Policy brief

‘Hydro Power projects in the CDM’ – CDM Watch Policy brief