The European Commission’s draft proposal will allow limited use of carbon credits from projects in other countries to achieve EU climate targets.
The draft amendments to the European Climate Law set a target of reducing emissions in the bloc by 90% compared to 1990 levels by 2040, while allowing countries to achieve part of this target by sponsoring climate projects outside the EU, typically in poorer countries. The Commission will publish the final draft on July 2.
The proposal reflects an agreement reached during negotiations that led to the formation of Germany’s coalition government, which called for limiting the use of such quotas to 3 percentage points of the overall target.
Details of the draft, which is still being discussed both within and outside the Commission, were described to POLITICO by a person familiar with its contents. Details about this person have been kept confidential so that they can discuss the confidential document.
The use of carbon credits would allow the EU, individual member state governments or companies — depending on the legislative details — to pay for emissions reduction measures in another country and count the resulting greenhouse gas emissions reductions towards their own climate targets, rather than those of the country hosting the project.
Existing EU climate targets require countries to achieve these reductions solely through domestic efforts, and critics warn that even partial reliance on credits will slow the pace of decarbonisation within countries.
Nevertheless, the idea is gaining traction in EU capitals.
On Tuesday, a representative of the French Ministry of Ecological Transition told reporters that EU Climate Commissioner Wopke Hoekstra had also raised the issue of introducing a 3% cap during discussions.
However, France believes that such a cap is too low.
“From what we understand — from what Germany has signaled, but also from what Commissioner Hoekstra has signaled — there is some discussion around 3 percent,” said the official, like others in this article granted anonymity to speak candidly. “We think it could go beyond that.”
A senior official from one EU government confirmed that Hoekstra had mentioned the 3% limit in discussions with other countries.
Officials from two other EU governments, who asked not to be named, said they had also heard that the Commission was leaning towards a 3% limit, but noted that the EU executive had not confirmed that the figure would be included in the proposal. The Dutch newspaper De Volkskrant reported a similar figure on Tuesday.
On Tuesday, a spokesperson for the French Ministry of Ecological Transition told reporters that EU Climate Commissioner Wopke Hoekstra had also raised the issue of a 3-point limit during discussions.
Hoekstra lobbied two coalition partners in Germany to include carbon quotas in their 2040 position, participants in those talks told POLITICO earlier this month. However, according to one participant, the 3-point figure came from the German side.
The European Union’s independent board of scientific advisers recently warned that carbon quotas would jeopardise the integrity of the EU’s climate targets. Vice-President for Climate and Competition Teresa Ribera also expressed scepticism.
However, many, including France, see quotas as a way to ease the burden of emissions reductions on European industry.
The European Commission declined to comment.
Setting standards
France is also “open” to discussing which projects generating credits should be financed, the official said.
“We don’t have a position whether it should be 5 percent or 10 percent, but we think it is an element of flexibility that we should negotiate on … and I think we might need to go a little bit beyond 3 percent.”
In contrast, Germany wants any EU-funded carbon credits to be used for “permanent” emissions reductions through “high-quality” projects, indicating its disagreement with nature-based projects such as reducing pollution by planting trees, as these methods can only temporarily sequester CO2.
French Minister for Ecological Transition Agnès Pannier-Runacher suggested that one reason the EU should opt for carbon credits is to compensate for the decline in the bloc’s forests’ ability to absorb carbon.
“We see [carbon credits] particularly as a way of responding to the uncertainty about our natural carbon sinks,” she told reporters on the sidelines of a Tuesday meeting of environment ministers in Luxembourg. “We know that given water stress, pests and climate change, there is a risk they will diminish.”
Her Finnish counterpart, Sari Multala, took a similar position, telling reporters upon arrival at the ministerial meeting that “there are some possibilities” to balance the EU’s reduced carbon absorption capacity with international quotas.
Finland’s extensive forests have become a source rather than a sink of CO2, partly due to excessive logging. This makes Finland the tenth EU country to support international compensation mechanisms, increasing pressure on the Commission to reach an agreement on carbon quotas to meet the 2040 target.
While carbon credits “should be a last-resort option,” Multala said, “I think it’s something we might have to be adopting, because otherwise we might not have a solution.”
