Executive Summary

The use of international offset credits was originally meant to be a cost containment tool. However, due to the economic crisis, EU emissions have been substantially lower than expected. This rendered the quantity limit of international credits for the period 2008 to 2020 too generous.  According to the recent European Commission report “The state of the European carbon market”, the use of international offsets in Europe’s Emissions Trading Scheme (EU-ETS) has almost doubled the oversupply in the period 2008-2011 and will amount to three quarters of the oversupply by 2020. A new report “Trend and projections in Europe 2013” published in October 2013 by the European Environmental Agency (EEA) shows that  EU Member States will over-achieve the EU’s 20% greenhouse gas reduction target for 2020 without implementing any new policies and measures

In addition, numerous reports have presented evidence that the Kyoto’s offsetting mechanisms may have delivered much fewer emissions reductions than were sold. One study estimates that up to 70% of all offset credits issued from the Clean Development Mechanism (CDM) between 2013 and 2020 may not represent real emissions reductions. The environmental integrity of the other Kyoto offsetting mechanism Joint Implementation (JI) is even more questionable with over 90% of offsets issued by Russia and Ukraine with very limited transparency and no international oversight.

EU Member States took a first step to address these quality concerns by banning offset credits from industrial gas projects. However, this ban has not yet been fully extended to the non-ETS sectors governed under the Effort Sharing Decision (ESD). Moreover, recent studies show the lack of environmental quality of other project types, notably large-scale energy projects and projects under Joint Implementation track 1. These have not been addressed so far, neither at the UNFCCC nor the EU level.

Putting in place further use restrictions is a vital step to avoid that EU climate legislation is undermined by substandard carbon credits that do not reduce emissions and increase global emissions if used to meet the EU climate target.