Sandbag, a British not-for-profit environmental campaigning organization, published a new report a few days ago called “Help or Hindrance, Offsetting in the EU ETS.” In this report, Sandbag analyses the impact of offsetting methods, such as, Clean Development Mechanism (CDM) and Joint Implementation (JI) projects.
In their previous report published in July, Sandbag noted that
the ETS “drove 2.2 billion tonnes fewer emission reductions than the
policy was expected to deliver when the caps were last set in 2008.”
Based on these results, the recent report questions the use of
offsetting as a tool to combat climate change, due to the
questionable investments, and the use of offsetting overall, given
the stagnant low carbon price.
“Offsetting was supposed to be a price containment measure to ensure
that carbon prices didn’t rise too high. Carbon prices have remained
low due to excess supply in the market,” stated Rob Elsworth, policy
officer at Sandbag. “Offsets are contributing significantly to this
oversupply and are now depressing prices so low that the EU ETS almost
ceases to have a function”, he adds.
An important finding of the study is the 85% increase in offsets being
surrendered into the EU ETS between 2010 and 2011. However, looking closer at these offsets, Sandbag observes that most of these offsets come from industrial gas credits for projects in China. The report shows that in 2011 there was a surge in use of these credits, anticipating the impending EU ban on industrial
gas credits from 2013. To this surge of credits, the report states, “Compliance installations are rushing to surrender cheap international credits while they are still available, so as to free up domestic allowances that can be banked forward indefinitely.”
Restructuring EU ETS
TheCompensators* agree with Sandbag’s position about the necessity of improving the EU ETS for its upcoming Phase III. As stated by Sandbag, some problems that should be assessed are the oversupply of carbon allowances leaving
the price below €8 per tonne and the 1.6 billion tonnes of offsets that
will be allowable for use in Phase II and III of the EU ETS, among others. Furthermore, to improve the quality of offsetting projects, investment
in coal or hydro power related projects should not be allowed, as this would force companies to reduce their emissions instead of strongly relying on offsets.
Sandbag, however, does note that some progress has been made to
improve offsetting. Prior to 2011, offsetting would be practiced in
very few countries such as China and Russia. Yet, for the first time
in 2011 countries such as Costa Rica, Uzbekistan, Georgia, Fiji and
Thailand saw their credits enter the EU ETS. Part of the reason for
this is that, starting in 2013, only projects coming from least
developed countries will count as an offset project. According to
Sandbag, it is anticipated that the majority of these credits will
come from Angola, Bhutan, Cambodia, Uganda and Lao.
TheCompensators* are convinced that working on restructuring of the ETS is a must for the EU and, even if the carbon price is lower that it should be, compensating through the EU ETS is the most powerful mean of compensation. To read more, why compensating with TheCompensators* is different, please read “What makes TheCompensators* special.”
To compensate right now, click here.