EU, U.S. plans allow most carbon cuts to be exported

LONDON Thu May 21, 2009 12:37pm EDT

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LONDON (Reuters) - The United States and European Union can pay to transfer to developing countries more than three-quarters of proposed carbon cuts over the next decade, draft and approved rules show.

That reinforces how rich countries may agree in December to tough targets to beat climate change, under a new treaty to replace the Kyoto Protocol, but avoid costly action themselves.

Europe five months ago hailed as ground-breaking an agreement to cut the 27-nation bloc's emissions by at least a fifth by 2020 compared with 1990 levels.

But analysts say that the fine print of the complex agreement allows EU countries and companies to pay developing countries to make about 75 percent of the pledged emissions cuts from 2008-2020.

Carbon caps required under a draft U.S. climate bill, expected to pass its first legislative hurdle on Thursday [ID:nN21275973], can be met entirely with imported offsets until after 2020, analysts say. The scheme would run from 2012.

"This level of offsets is too generous," said Rachel Cleetus, climate economist at the U.S.-based Union of Concerned Scientists, referring to the proposed U.S. bill drafted by Henry Waxman and Edward Markey.

But she pointed out that offset quality limits would curb supply, while domestic cuts for example to boost energy efficiency could work out cheaper than expected.

Also hinting at tough targets, the European Union wants to force developing countries to beat certain efficiency standards in order to qualify to sell these credits.

The point of carbon offsets is to trim the cost of fighting climate change by allowing companies and countries to pay others to curb greenhouse gas emissions on their behalf, if that works out cheaper.

For example, rich countries can pay for projects to build wind farms or dams in Latin America, or to improve energy efficiency in factories in China or India.

EU, U.S.

Carbon market enthusiasts say that trade in offsets will raise vital funds to fight climate change in developing countries where emissions are growing fastest. Environment groups say developed countries must commit to domestic action.

"I think we need to get real, move beyond this concept of offsetting," said Kirsty Clough, climate officer at WWF UK.

"In developed countries we need to take robust reduction targets ourselves, and also help developing countries move toward a low-carbon future. It's not either, or."

Scientists say that the next 10 years are a critical period to slow rising global emissions, so that these peak by 2020, in order to avoid dangerous climate change.

The EU 2020 target divides climate action between heavy industry and the rest of the economy.

The EU as a whole can pay developing countries to meet 70-80 percent of the bloc's pledged carbon cuts from 2008-2020, SocGen and Barcap analysts told Reuters.

That estimate calculated cuts against a flat emissions trajectory from 2008.

The U.S. draft, which faces much debate in Congress even if approved by a key committee this week, allows imported offsets to be exchanged for 1.2 billion tonnes of emissions annually -- more than all carbon cuts required under the scheme initially.

"We don't expect domestic abatement to be required until after 2020," depending on the trajectory of U.S. emissions, said Barcap analyst Trevor Sikorski. The U.S. carbon caps can be met with imported offsets until 2021, said analysts Point Carbon.

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