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EU bans industrial gas credits from the ETS

January 2011 - From May 2013, certificates generated from most of the industrial gas projects implemented under CDM and JI will no longer be counted towards compliance in the EU Emissions Trading Scheme (EU ETS). The decision was reached by the Climate Change Committee of the European Council on 21 January 2011. Certificates generated in HFC23 and adipic acid projects may be used in the ETS until 30 April 2013. After that date, they will no longer be accepted.

The EU Commission had presented its proposal to place “use restrictions” on counting CERs and ERUs from industrial gas projects towards compliance in the EU Emissions Trading Scheme in November 2010. This was in response to the considerable concern regarding the environmental integrity and the cost-effectiveness of this project type, which have long attracted criticism. Other than has since been agreed, the Commission proposal put forward by Climate Commissioner Hedegaard called for the restrictions to be introduced at the start of the third ETS trading period, that is at the beginning of January 2013. This proposal was unsuccessful, however.

The European Parliament now has three months in which to present its standpoint regarding the decision. If the Parliament has not raised any objections by the end of April 2011, the Regulation will enter into force.

Role of the market-based mechanisms

The decision made by the Climate Change Committee on 21 January 2011 underlines the need for further efforts by all big carbon emitter states in order to keep global warming to a maximum 2° Celsius. The responsibility of the emerging economies was also discussed: they are expected to implement cost-effective emission reduction activities themselves.

The decision also highlights the importance of the market-based mechanisms designed to make a significant contribution towards funding climate change activities. From 2020, an additional US$ 100 billion per year will be made available for international climate change mitigation efforts. This amount cannot be generated from tax revenue in the industrialised states alone.

To achieve this goal, the market-based mechanisms must take on new dimensions. Key approaches include CDM reform, the use of standardised baselines, and the development of new market-based mechanisms.