EU officials did not assess the economic or environmental impacts of a contentious plan to pay poorer countries to cut pollution on Europe’s behalf, the EU executive has admitted in response to a records request.
The use of carbon credits, which can be purchased by funding carbon reductions outside the EU, would be allowed under a European Commission proposal to cut climate pollution by 2040.
But the basis for this choice did not involve any formal advice from the experts in the European Union’s climate department, DG CLIMA.
In response to a document request by POLITICO seeking the Commission’s analysis of the economic and emissions impact of the policy, the EU executive branch responded that although it had consulted the economic analysis and modeling unit, “We regret to inform you that DG CLIMA does not hold any documents.”
Climate campaigners and the EU’s own scientific advisers have criticized the proposal for weakening the bloc’s domestic efforts to curb greenhouse gas emissions. They have also warned of risks that the credits could be fraudulent or undermine the EU’s carbon trading system.
In the face of this, the Commission capped the use of the credits at 3 percentage points of the target to help reach an overall cut in emissions of 90 percent below 1990 levels by 2040.
An initial impact assessment for the 2040 target produced by the Commission last year did not make any analysis of carbon credits use — an option that only entered into discussions this past spring.
Commission spokesperson Anna-Kaisa Itkonen said the EU executive had conducted “extensive engagement” with “stakeholders” and political groups before publishing the proposal, in order to “consider the possible inclusion of a limited amount of high-quality international credits in the design of the post-2030 policy framework.”
Itkonen added that the Commission had committed to carrying out an impact assessment on the use of the international carbon credits.
In June, the head of the climate department, Kurt Vandenberghe, said his team was “not entirely prepared” for the proposal, which was championed by Climate Commissioner Wopke Hoekstra.
Advocates of the system — including Hoekstra and also notable carbon markets experts — point to improved international agreements designed to prevent dodgy credits.
The policy could have major implications for EU spending and the bloc’s efforts to curtail climate impacts.
Three points of the 90 percent target amount to roughly 144 million metric tons of greenhouse gases — equivalent to the current annual emissions of the Netherlands and 30 percent of total EU emissions in 2045, as calculated by the Carbon Market Watch NGO. A credit represents one metric ton.
But the nonprofit estimates that depending on how the bloc ends up defining the cap on credit use, it might end up purchasing as many as 700 million credits.
The price on pollution varies wildly across markets and countries, from a global average of less than $5 per metric ton of carbon offset last year to the EU’s current domestic price of roughly €70 ($82) per metric ton of carbon emitted.
The cost of the credits the EU plans to purchase abroad, and whether companies or taxpayers would pay for them, is unclear for now — one of many unanswered questions an impact assessment would presumably help to address.
Any cash spent on credits would then be unavailable to help the bloc’s own economy decarbonize, the EU’s scientific advisers warned. In a June note they said the cost of trustworthy credits that actually deliver pollution cuts was “very high … Purchasing such credits from abroad could therefore come at the expense of domestic investment opportunities.”
The Commission, in its announcement of the target, promised to deliver a “thorough impact assessment” when proposing the detailed legislation for carbon credit use. This proposal is expected next year.
In June Vandenberghe echoed the concerns of campaigners, who have frequently pointed to a previous episode that saw dodgy credits flood the EU’s carbon market, tanking the price and hurting emissions-reduction efforts.
“We would be well advised to do a very deep impact assessment to look [at] all the detailed questions,” he said.
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