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EU Ban on UN Carbon May Flag End of Offset Market, Nomisma Says

January 22, 2014

A proposed European Union ban on the use of United Nations carbon credits in its emissions market may signal the end of the international offset market, according to energy consultant Nomisma Energia srl.

The European Commission today set out emissions targets for 2030 that only allow the import of carbon credits if an ambitious global climate deal is agreed in Paris next year, the EU’s executive arm said on its website. The commission wants to cut emissions 40 percent from 1990 levels by 2030.

Factories in the EU’s carbon market have been able since 2008 to offset a portion of their pollution limits with credits generated by projects in the UN’s Clean Development Mechanism. The price for UN-overseen credits slumped 98 percent in the past six years, reducing the incentive for nations to invest in less-polluting energy in developing economies.

“The EU decision might be the end of the CDM as a market,” Matteo Mazzoni, an analyst at Nomisma Energia in Bologna, Italy, said in a phone interview today. “There will still be some trading and people will try to extract something from their investments in projects, but without any new demand there isn’t much of a market anyway.”

Trade in UN Certified Emission Reductions dropped 70 percent to 464 million metric tons in 2013 after hitting a record 1.57 billion tons in 2012, according to data from ICE Futures Europe exchange in London. CERs for December rose 2.7 percent to 0.38 euros ($0.52) a ton at 2:07 p.m. The benchmark contract traded as high as 23.38 euros a ton in July 2008.

“It’s disappointing that there’s no international offsets after 2020,” even from the least-developed nations, said Andrei Marcu, senior adviser at the Centre for European Policy Studies in Brussels. “That will put a dampener on investment in emission-reduction projects” and potentially on carbon-cutting programs in emerging nations, he said.

The commission proposal leaves the option open to allow the use of unspecified emissions offsets “should the 2015 global agreement enable the EU to increase its greenhouse-gas reduction target for 2030 to more than 40 percent,” according to the statement.

To contact the reporter on this story: Alessandro Vitelli in London at avitelli1@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net


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