Paris agreement must restrict old carbon offsets: EU

  • : Emissions
  • 19/06/04

Countries should not be allowed to use carbon offset credits produced before 2020 to meet their greenhouse gas emissions reduction targets under the UN Paris climate agreement, EU climate commissioner Miguel Arias Canete has said.

Negotiators are hoping to complete rules that could establish an international carbon market under the Paris agreement at a UN climate summit in December, after talks on this issue broke down at last year's summit. A sticking point in the negotiations is whether countries will be allowed to use emissions reduction credits generated under the Kyoto protocol's clean development mechanism (CDM), to comply with their Paris agreement targets.

EU climate commissioner Canete has urged countries to restrict the use of these credits. "The use of pre-2020 units towards post-2020 obligations could significantly undermine ambition," Canete said.

The first CDM projects were registered in 2001, meaning that some credits issued by these projects represent CO2 cuts that were achieved more than a decade ago. Countries' Paris agreement targets take effect from 2020.

Article 6.4

The issue sits inside Article 6.4 of the Paris agreement, which will set up a sustainable development mechanism (SDM) to succeed the CDM.

Negotiators have not yet decided whether CDM projects, and certified emission reduction (CER) credits generated by them, will be transferred to the new mechanism.

The system should avoid "unrestricted banking" of Kyoto protocol units, Canete said. Failing to avoid this would "undermine ambition from the very beginning", he said.

Canete's comments echo those of some parties in the UN negotiations, who want to use the SDM as a way to start a fresh carbon market, containing only newly issued credits that meet certain standards. But others worry that if CDM credits are not transferred to the new market, the system will not contain enough supply to set up a functioning carbon market. It could take years for SDM projects to start issuing their first credits, meaning the new market could struggle with low liquidity.

Most large carbon markets, including the EU's, have restricted the use of CDM credits for compliance, partly because of concerns over the environmental integrity of credit-issuing projects. Critics of the system say the credits do not represent "additional" emissions cuts — some CDM projects would likely continue cutting CO2 even if they stopped selling emissions reduction credits, so buying their credits does not support "additional" emissions cuts.

Low demand for the credits has caused a large oversupply to build up in recent years, and kept prices low. The price of certified emission reduction (CER) credits has been below €1/t of CO2 since late 2012.

"It is important to be blunt here — the CDM delivered investment, but it did not work for everyone, particularly in terms of additionality, distribution and sustained demand," Canete said.

This year's negotiations on Article 6 will kick off this month at a UN meeting in Bonn. Final decisions are expected to be taken at the UN summit in December, in Santiago, Chile.

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more