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15th May 2021

States ban certain offset credits from EU's emission trading system

EU member states have elected to ban the use of certain emission offset credits from the bloc's emissions trading system (ETS), currently embroiled in a separate controversy over cyber-theft.

The vote on Friday (21 January) means that companies will be prevented from using the emission offsets - generated through projects that destroy certain powerful greenhouse gases linked to the refrigeration industry - from 1 May 2013.

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  • Critics say the offset credits incentivise some Asian companies to create powerful greenhouse gases so they can then be destroyed (Photo: Notat)

EU climate commissioner Connie Hedegaard, who proposed the ban last November, welcomed the decision by the EU Climate Change Committee of relevant member state experts.

"These projects raise concerns relating to their environmental integrity, value-for-money and geographical distribution," Ms Hedegaard said in a statement.

"Not only are some of these credits of doubtful value, continuing to use them is also not in the EU's interest as doing so could discourage host countries from supporting cheaper and more direct action to cut these emissions," added the Danish politician.

The ban will apply to projects which destroy two industrial gases: trifluoromethane (HFC-23) produced as a by-product of chlorodifluoromethane (HCFC-22) production, and nitrous oxide (N2O) from adipic acid production.

EU officials say just 23 such industrial gas projects account for roughly two-thirds of all the credits generated through the Kyoto Protocol's Clean Development Mechanism (CDM), with most of the projects carried out in China and other advanced developing countries.

Climate campaigners hailed the European ban as a significant step forwards.

"The scandal surrounding HFC-23 credits severely damaged the credibility of the carbon market," said Natasha Hurley, EU Policy Advisor at CDM Watch. "Today's vote marks an historic victory for environmental integrity over financial interests and puts the EU ETS back on the right track."

But the group criticised the decision by member state experts to enforce the ban four months later than the commission's original proposal, saying this reflected "pressure from a small group of investors who lobbied hard to extract as many concessions as possible".

MEPs now has three months to comment on the proposal, after which the commission will formally adopt it.

Friday's decision comes after a series of recent cyber-thefts forced trading exchanges dealing in ETS carbon allowances to grind to a halt on Wednesday. The closure is expected to last at least a week as the national exchanges seek to step up their security systems.

The commission estimates roughly €30 million in carbon allowances have been stolen in the recent string of attacks which saw hackers gain access to computer systems and transfer the credits to separate accounts.

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