EU Panel May Slow Push for More UN Emission Credits

By Jonathan Stearns

Oct. 3 (Bloomberg) -- The European Parliament's environment committee may scale back a plan to let energy and manufacturing companies import more emission credits through 2020, highlighting concerns about flooding the market.

Compromise proposals by leading members of the panel would allow carbon-dioxide emitters to cover up to 4 percent of their discharges annually through 2020 with credits gained from energy-efficient projects outside the European Union. An earlier proposal by Avril Doyle, an Irish member steering the draft law through the EU Parliament, would set the limit at 5 percent.

The compromise amendment, seen today by Bloomberg News and backed by Doyle, would translate into about 1.65 billion metric tons of emissions in 2008-2020 compared with 1.69 billion tons under the original Doyle plan, according to her office in Brussels. Those figures compare with 1.4 billion tons over the period under the draft legislation presented in January by the European Commission, which opposes raising the limit.

The inflow of credits ``needs to be managed very carefully to ensure that substantial domestic emission reductions will happen within the EU,'' the commission said in an unofficial position paper sent to members of the 27-nation Parliament. The United Nations-backed credits are generated under the Kyoto Protocol's clean development mechanism.

Oct. 7 Vote

The Parliament's environment panel is due to vote Oct. 7 on the new EU law, which would also reduce CO2 quotas on electricity, steel, paper and other industries now in the European emissions-trading system by 11 percent on average in 2013-2020 compared with 2008-2012.

The legislation is part of EU plans to reduce greenhouse gases including CO2, the main such pollutant, by a fifth in 2020 from 1990. The European emissions-trading system, the world's biggest greenhouse-gas market, requires companies that exceed their allowance-based quotas for CO2 to buy permits from businesses that emit less.

Access to imported credits reduces costs for European factories and power plants because UN permits are cheaper than EU allowances and can be used as an alternative for compliance under the emissions-trading program. Industry and traders are pressing the EU to be more flexible with foreign credits beginning in 2013.

Global Accord

The commission proposed on Jan. 23 to limit the use of imported credits to unexhausted quotas fixed for 2008-2012 as long as no global accord is reached to succeed the Kyoto Protocol after 2012, saying looser rules could open the ``floodgates'' for extra supply.

The commission, the EU's regulatory arm, also says any greater use of imported credits should be tied to a new international accord being reached so that developing countries including China and India have an incentive to sign up.

``Giving too much access to credits in the absence of an international agreement would take away this leverage on this key issue,'' the commission said in its position paper.

The environment committee's plan to let companies use imported credits to cover up to 4 percent of their discharges would be an alternative to carrying over into 2013-2020 unused import quotas already set for 2008-2012. The new option would be conditional on companies having used such credits in 2008-2012 for less than 6.5 percent of their emissions.

One-Third or 45 Percent?

The commission has said that, under its proposal, UN credits would probably meet a third of the EU's greenhouse-gas reduction effort planned through the emissions-trading system and has called that level ``enormous.''

In its paper for Parliament members, the commission says the 1.4 billion tons of emissions that would be covered by imported credits under its proposal would represent 45 percent of the reduction effort.

The commission's environment spokeswoman, Barbara Helfferich, declined to comment on the 45 percent figure when reached today by telephone. She said the paper for Parliament members isn't official and the commission stands by the original one-third estimate.

An aide to Doyle said the environment committee members used the commission's unofficial paper to draw up the compromise amendments. The draft EU legislation ultimately needs the support of the full 785-seat EU Parliament and national governments.

To contact the reporter on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net