Kyoto credits ‘could exceed European demand’

Proposed changes to the EU's Emission Trading Scheme could result in the number of Kyoto credits outstripping European demand, analysts have said.

In January, the European Commission announced proposals to alter the scheme beyond 2012, including limits on the number of credits from the Clean Development Mechanism (CDM) and Joint Implementation (JI) mechanism that can be used up to 2020.

Under the plans, for CDM-projects started after 2012, only credits from projects in least developed countries may be used.

Analysts Point Carbon said if the changes are approved it would reduce long-term demand for the Certified Emission Reductions (CERs).

The company’s monthly carbon market report said: “If we compare the European demand to the estimated future CER supply, it certainly leaves a bleak picture for the future of the CDM.

“Point Carbon’s latest supply estimate indicates that CERs will be issued at a rate of about 345 Mt/year in 2012 from projects that have already been started.

“Hence, without initiating a single new project, the supply rate by 2013 is likely to exceed the whole European demand.”

The report also said CER prices fluctuated in February following the publication of the Commission’s proposals and some deals came to a halt as buyers and sellers failed to agree on a price.

A new report from the European Environment Agency also published this month revealed that implementation of the EU ETS by member states improved in 2006, according to information reported last year.

It also revealed three member states – Italy, Hungary and Spain – imposed fines in 2006 for infringement of national rules on the operation of the ETS.

Kate Martin

Action inspires action. Stay ahead of the curve with sustainability and energy newsletters from edie