Europe's Decision To Stay Local Imperils UN’s Carbon Offset Program

UN Climate Change Conference


March 20, 2014

Citing a lack of progress in global efforts to fight climate change, European Union (EU) officials have decided to limit carbon offsets to those made within Europe. Prior to this decision, EU member countries could purchase carbon credits from the United Nations' Clean Development Mechanism (CDM) projects, which could then be used to meet national carbon caps.

The CDM program offers carbon credits backed by the U.N., and has helped channel more than $315 billion into developing countries as renewable energy and alternative industrial processing projects. The program has supported more than 7,000 installations that cut emissions in 113 countries. Investors in UN-approved projects get certified emissions reductions (CERs) they can sell to companies and governments bound by pollution caps. The purchaser can then use the credits to offset emissions.

Over the past 10 years, Europe and Japan have bought the lion’s share of the 2.2 billion carbon credits issued. European polluters used 1.06 billion tons of a 1.6 billion-ton limit on UN credits to meet their obligations under the bloc’s Emissions Trading System (ETS).  As EU member nations are set to discuss future energy and climate targets, the role of UN carbon offsets will likely be part of the debate. Whether they play a role in a greater European approach to combating climate change remains foggy.

With demand all but evaporating from Europe, the future of the CDM program is in doubt. Several European governments have pledged to pay above-market rates for credits from the poorest nations, and the EU has extended technical support to wealthier economies such as China, Mexico and South Korea to help set up their own trading systems. However, the influence of the global trading system appears to be waning as it gives way to local and regional plans to combat climate change.