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Quality Restrictions in the EU ETS: HFC and N 2 0

Quality Restrictions in the EU ETS: HFC and N 2 0. 12th January 2011 Fionnuala Walravens – Environmental Investigation Agency Rob Elsworth – Sandbag Climate Campaign. Introduction. Sandbag / EIA supports the Commission’s proposal to ban HFC and N 2 O offset credits from 1 st Jan 2013.

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Quality Restrictions in the EU ETS: HFC and N 2 0

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  1. Quality Restrictions in the EU ETS:HFC and N20 12th January 2011 Fionnuala Walravens – Environmental Investigation Agency Rob Elsworth – Sandbag Climate Campaign

  2. Introduction • Sandbag / EIA supports the Commission’s proposal to ban HFC and N2O offset credits from 1st Jan 2013. • Support based on a number of factors: • Undermining both the Montreal Protocol and the EU’s international climate objectives • Value for money • Geographical distribution • Limited Sustainable Development benefits

  3. Montreal Protocol • The Montreal Protocol established the accelerated phase-out of HCFC-22 (an ozone depleting substance) • However, the lucrative nature of HFC-23 projects discourages producers of HCFC-22 to reduce their production – rather it causes perverse incentives • Subsidising HCFC-22 production through the CDM prevents uptake of environmentally friendly alternatives • Carbon leakage production shift to developing countries • EU is financing the phase-out of HCFC-22 through the Montreal Protocol, at the same time paying for HFC CERs

  4. HFC interactions with EU’s international Climate position • EU position for Cancún – as adopted by EU environment ministers on 14th Oct 2010 • Point 9 - Increased global abatement efforts from advanced developing countries • Point 14 - Montreal Protocol may be suited to abating HFCs • Point 21 - CDM reform: improved environmental integrity and • regional distribution • UNFCCC has failed to address flaws in AM0001 • CDM Methodologies Panel Investigation found AM0001 “may inflate baseline emissions” and recommends a revision. However unlikely to affect first crediting period • Europe must take the lead and set an example for global carbon markets • Cannot afford to allow minority interests to undermine EU leadership

  5. Value for money • Technical and Economic Assessment Panel (TEAP) estimates HFC-23 abatement to cost about €0.17/tonne CO2-eq abated • Europe is paying €12/tonne to abate HFC-23 • To date (2008-2009) Europe has spent €1.2bn on HFC credits for compliance in the EU ETS. • Real cost of HFC-23 destruction in CDM is €16.5 million-70 times higher • These credits originated from 18 CDM projects. There are 2718 registered CDM projects • Diverting funds away from vulnerable regions

  6. Geographical distribution

  7. Project distributionCERs surrendered into the EU ETS to date: 160 million = €1.9bnHFC CERs – 97 million = €1.2bn

  8. Timing of ban • Article 11.a (9) foresees that "from 1 January 2013, measures may be applied to restrict the use of specific credits from project types.“ • A ban as of the 1st Jan 2013 is consistent with the EU ETS Directive • Market participants were aware of this date and its implications – strategy should have altered accordingly • Secondary markets ready to accommodate 1st January ban, only small number of investors may be affected

  9. NO Credit Exchange • Sandbag / EIA categorically opposes any carryover of credits between phases • Any carryover would fundamentally undermine this proposal • The ban must be clear and comprehensive – no HFC/N20 credits post 1st Jan 2013

  10. Thank you for your attention!Fionnuala Walravens - fionnualawalravens@eia-international.orgRob Elsworth - rob@sandbag.org.uk

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