Oil Report

EU states express doubts over carbon offset ban

* EU Commission to propose curbs in carbon offsets

* HFC credits accounted for 59 pct of imports in EU in 2009

* Proposal likely to rile China, other developing nations

LONDON, Nov 3 (Reuters) - European Union member states may oppose new rules on how far their factories and power plants can offset their carbon emissions, as desired by the European Commission, environment ministries told Reuters.

The EU executive Commission is expected to propose in the next two weeks curbs or an outright ban from 2013 on the use of the most common types of offsets.

Europe’s emissions trading scheme caps planet-warming gases emitted by industry, but allows companies to offset emissions by paying for carbon cuts in developing countries, as a cheaper alternative to cutting their own.

Closing the main supply of such offsets could push up carbon prices, if agreed by a majority of member states at a meeting of Commission officials and environment ministers later this month.

“From Poland’s perspective, of course, key problem are those installations which have to buy enormous amounts (of offsets), price hikes would be problematic for them,” said Urszula Allam-Pelka, an official at Poland’s Environment Ministry.

Allam-Pelka did not say that Poland would oppose a ban. East European countries including Poland have previously disputed their carbon caps seeing these as a handcuff on economic growth.

Europe's carbon market forces companies to submit permits for every tonne of carbon dioxide emissions, which are trading at about 15 euros per tonne. CFI2ZZ0

Companies are allowed to use carbon offsets equivalent to about 13 percent of their cap. Most of those offsets come from chemical plants which manufacture refrigerants largely in China and India, and which cut greenhouse gas emissions at least cost.


The EU Commission questioned in August the environmental integrity of such projects which destroy a powerful greenhouse gas waste product called HFC-23. [ID:nLDE67O1ZK]

HFC projects accounted for about 60 percent of offsets imported into the EU emissions trading scheme last year, according to the Sandbag environmental group.

A united EU decision will be decided by a qualified majority vote, requiring at least 14 of the bloc’s 27 countries.

While Poland does not have the power to block a proposal bigger countries were also unsure.

“There is not yet a unified line by the German government,” said a German environment ministry spokesman. The environment ministry had sympathies with the EU plan but a joint stance must be agreed for example with the economy ministry, he added.

An official at Spain’s environment ministry said: “We consider it essential to guarantee a suitable transition that does not put in question the security of trading and carbon markets.”

A UK energy and climate ministry spokesperson said: “We welcome the Commission taking a proactive role in this area.”

One possible alternative to a ban may be to discount HFC credits -- for example making each worth half a carbon offset.

Trade in carbon offsets is regulated under the U.N.’s Kyoto Protocol, and an EU HFC ban is likely to irritate developing countries, and especially China, home to many HFC projects.

U.N. climate talks resume later this month in Cancun, Mexico, and are deadlocked for example on how far rich countries should pay for emissions cuts in the developing world. The Kyoto offset scheme has been the main source of carbon finance so far.

Benchmark carbon offsets, or certified emissions reductions (CERs), were trading at about 12.5 euros on Wednesday. CEREZZ0