The European Union’s policy for carbon offsets is providing higher profits to industrial companies in rich countries and needs to be updated to deliver clean technology in developing countries, according to a report (PDF) from Sandbag.
A key finding indicates that EU companies are funding abatement projects at their competitors, which Sandbag’s founder and director Bryony Worthington says raises the question of why they choose to subsidize their international competitors, for example, by buying offset credits originating at Chinese and Indian steel works, when they have been raising fears of carbon leakage — moving their business outside the EU.
In particular, EU steel companies have claimed that caps on emissions will force them to move overseas but the report shows that iron and steel companies are voluntarily sending cash to their competitors in developing countries, which undermines their claims.
The single biggest purchaser of offsets in 2009 was steel company Salzgitter’s Glock Salzgitter plant, which offset 99.5 percent of its emissions in 2009 using CERs, of which 89 percent were from HFC and N2O projects and an additional 40,000 sourced from an Indian steel work CDM project.
Similarly, a report released in May alleges that the European cement and steel industries threats of relocation and increased global emissions were exaggerated.
In addition, 84 percent of offsets used in 2009 originated from industrial gas projects in China, India and South Korea, which provided healthy profits to chemical companies in these countries and in China, according to the report. A significant number also has been sourced from more directly competing sectors. As an example, more than 2 million steel CERs worth approximately €22 million (about $28 million) were used for compliance in 2009.
Report researchers recommend that the EU reform its rules to phase out the use of credits from industrial projects in rich developing countries in favor of more sustainable projects in least developing countries.
Click here for Sandbag’s interactive map that links the types and locations of offsets with who has used them.