EU’s new climate target lines up multibillion-dollar boost for carbon markets

After arduous late night talks on Wednesday, European Union countries finally agreed a 2040 goal to cut the bloc’s emissions by 90% from 1990 levels, including a contentious concession that would let them buy foreign carbon credits to cover 5%.

Under the deal, which must be approved by the European Parliament, the EU stands to buy 710 million metric tonnes of carbon dioxide equivalent (CO2e) offsets worth about 50 billion euros ($57 billion) during the 2030s, according to an estimate by the Carbon Market Watch campaign group. That could give a huge boost to carbon credits from emissions-reduction projects, which are struggling with shrinking demand amid increased scrutiny of the sector.

Trishant Dev, carbon markets lead at the Centre for Science and Environment (CSE), a Delhi-based think-tank, told Climate Home News that 5% “may seem small compared to the EU’s overall emissions cuts, but in absolute terms it represents a vast volume of offsets, and therefore, massive investments in offset projects”.

On top of the 5% of the EU’s 1990-level net emissions, EU countries may be able to use offsets to cancel out another 5% of their national emissions, increasing the bloc’s wiggle room on meeting its headline climate goals and drawing criticism from some climate campaigners.

Countries split on counting carbon credits

The possibility of using carbon credits was supported by the European Commission and numerous member states including Sweden, Ireland, Poland and Austria.

Poland had pushed for 10% to be eligible for carbon credits, after one senior climate official hailed them in September as “a cost-efficient measure to cut emissions.”

The Netherlands’ representative, meanwhile, opposed using more than 3%, saying that “availability, price and quality remain uncertain”. International credits should just be a “safety net”, he said.

Slovakia’s environment minister also voiced concern about cost, saying the use of credits “may sound attractive but, with an estimated price…about €250 ($288) a tonne, this will not work for all of us”.

Several other wealthy nations – such as Norway, Switzerland and Singapore – have already said they intend to use or may use some carbon credits to meet their 2035 climate targets.

But Japan is the only major emitter that has specified how much it wants to buy – 200 million metric tonnes of CO2e by 2040, which at Carbon Market Watch’s assumed price of $70 a ton, would cost $14 billion.

Many countries – particularly in the Global South – have indicated their interest in selling credits. Thailand, for example, has already sold credits to Switzerland in return for rolling out electric buses in Bangkok, although the integrity of that deal has been questioned.

Critics say EU should reduce emissions at home

While EU officials and carbon market supporters defended the bloc’s policy shift on offsets, climate campaigners were mostly critical.

They said credits are expensive and will not reduce emissions by as much as they are supposed to, accusing the EU of dodging its responsibility as a historically large polluter to reduce the bloc’s emissions domestically.

Fabiola de Simone, policy officer at Carbon Market Watch, told Climate Home News the EU’s climate target and the offsets were an “international embarrassment” for the EU which will mean “way more emissions than science says you should do”.

Zimbabwe forest carbon megaproject generated millions of junk credits

“There is less of an incentive for member states to reach their national obligations after 2030 because they know that they could potentially rely on international credits up to 5%,” de Simone said.

Pedro Martins Barata, who works on carbon market integrity for the Environmental Defense Fund, called the flexibility in the EU’s target “disappointing”.

But, he said, the EU could use its clout as a dominant buyer to promote high standards for credits, such as environmental safeguards in offset methodologies.

“Planet doesn’t care where we cut emissions”

Carbon market advocates say it does not matter where in the world emissions reductions take place, that reducing emissions with offsets can be cheaper than cutting them directly and that developing countries can benefit from the money and other support they receive by selling credits.

“The planet doesn’t care where we reduce emissions,” EU climate commissioner Wopke Hoekstra told a press conference on Wednesday, adding that the 5% quota for offsets was optional.

Ukrainian scientist Olga Gassan-Zade, a member of the supervisory body of the Paris Agreement’s new Article 6.4 carbon market, told Climate Home News that without demand for credits – like that coming from the EU – international carbon markets would fail.

That would be bad, she said, because “it is maybe hard to see from the Global North, but the developing world lives in a different dimension”. “International markets are not just about finance but are also about technology transfer, knowledge transfer, training of climate change professionals [and] equity,” she added.

From Delhi, CSE’s Dev said carbon markets have often enriched intermediaries rather than supporting genuine emissions cuts. “These funds must therefore cover the true cost of mitigation, ensuring that communities are not short-changed or made to subsidise Europe’s continued emissions,” he said.

The post EU’s new climate target lines up multibillion-dollar boost for carbon markets appeared first on Climate Home News.