EU should allow more carbon offsetting: lawmakers

BRUSSELS (Reuters) - The European Union should allow industry to offset a quarter of the cuts in greenhouse gases they have to make under emissions caps from 2013-20, EU lawmakers say in draft proposals seen by Reuters on Thursday.

If enacted under an EU Parliament vote expected in coming months, and agreed by member states, the proposals by the EU parliament industry committee would allow more offsetting compared with the EU executive Commission's proposals in January.

That would be good news for EU industry, by cutting the cost of meeting emissions caps, and for carbon traders in a rapidly expanding, $64 billion market in emissions permits and offsets.

"It's higher than what we have now, but it's not that much more because it's worded in terms of percentage of effort, rather than of the cap," said SocGen analyst Emmanuel Fages.

Carbon offsets allow countries, companies or the public to pay someone else to cut greenhouse gas emissions on their behalf and they have been criticized as an option that is too easy.

The Commission's January proposals effectively froze the use of offsets from 2008-20 at a previously agreed cap of 1.4 billion tons for 2008-12.

The lawmakers' new amendments would allow businesses from 2013 to use additional offsets equal to a quarter of their emissions cuts compared to a 2008-2012 baseline.

"The annual use of credits (offsets) by installations... shall not exceed a quantity equal to 25 percent of the greenhouse gas emission reductions required for the installations covered.... (compared to) the average emissions of the installations concerned in the period 2008 to 2012," the proposed amendments said.

The average cap from 2008-12 under the EU emissions trading scheme is 2.082 billion tons of carbon dioxide (CO2), while the proposed average cap from 2013-20 is 1.846 billion tons, Deutsche Bank research published in January shows.

The Commission's January proposals had assumed there was no new global agreement to extend or replace the Kyoto Protocol, and allowed more offsetting in the event of such a deal, while the lawmakers amendments were regardless of such agreement.

"This would enter into force in 2013 with or without an international agreement," said Lena Ek, the Swedish member of the European Parliament guiding the emissions trading legislation for the industry committee.

The committee will vote in two weeks' time on the amendments which Ek said would likely form the core of the proposals voted on by the EU parliament in coming months. An agreement would then have to be approved by member states.

The industry committee backed the Commission's January proposals that in the absence of a new climate treaty offsets should only come from least developed countries for new emissions-cutting projects from 2013.

If a climate treaty were agreed offsets -- called certified emissions reductions (CERs) and emissions reduction units (ERUs) -- should only be allowed from countries which had ratified that agreement, the amendments added.

The proposals backed emissions-cutting projects supporting renewable energy, energy efficiency, reforestation, reduced emissions from deforestation and other sustainable forestry projects and activities.