04 May 2011

Carbon Offsets in the EU Emissions Trading System: summary of 2010 data

The European Commission has released new data showing how many carbon offsets have been used in its Emissions Trading System. Here are some quick notes on what's hidden away in those figures:

* 137 million in offsets were used in the EU ETS in 2010. This includes 117 million CERs (credits from the Clean Development Mechanism), compared to 78 million tonnes in 2009.

* 20 million ERUs (credits from Joint Implementation) were used, compared with 3.2 million in 2009 (a 625% rise).

* The majority of international offsets were used by companies in the power sector: 83.6 million, a little over 60 per cent of the total. Cement, lime and glass used 13 million offset credits, and oil and gas used 12.8 million credits.

* German companies were the largest users of offset credits, handing in 37.6 million tonnes, followed by Spain and Poland (15.7 million tonnes).

* A total of 277.28 million offsets have been used in the ETS phase 2 (from 2008) so far. The top 20 installations using these credits accoung for 59.33 million of these (around 20 per cent of the total).

* The 2010 data are not disaggregated from previous years – but it seems, on initial examination, that HC Energia (Gijon, Spain, ref: ES033301000215) with 3.3 million CERs and US Steel Kosice (Slovakia) with 2.2 million surrendered CERs surrendered in 2010 are the installations that have used the most offset credits this year.

* Overall in phase 2 of the EU ETS, the largest number of CDM offset credits have been surrendered by Elektrownia Belchatow, the largest single polluter covered by the scheme. Its verified emissions were 29.66 MtCO2e in 2010. Most of these were accounted for by free permits: the plant received an allocation of 26.93 million EUAs (European Allowance Units) in 2010. As a result, it had to buy at least 2.72 million permits. In the event, however, it surrendered 4.09 million CERs (CDM credits) in 2010.1

* Glocke Salzgitter (a German steel plant) is an even clearer case of using cheap offsets to delay action to reduce emissions at source. In 2010, it had the fifth largest surplus of permits in the EU ETS (5.26 million in 2010, yielding around €62 million in windfall profits2). In other words, the scheme places no real obligations on the plant in the first place. Yet it saw fit to hand in 1.5 million offset permits (and over 400,000 ERUs.3 in 2010. This appears to be part of a strategy to stockpile surplus permits to delay emissions reductions further into the future. The majority of the CERs used by the company come from HFC projects in China.

* The largest number of ERUs from Joint Implementation were handed in by S.C. Electrocentrale DEVA S.A of Romania (1.7 million), the country's fourth largest polluter. It had not previously handed over any ERUs. This use of such a large volume of offsets is particularly notable, given that the company already had a surplus of 1.99 million permits in 2010 (it had an allocation of 3.6 million permits, and its “verified” emissions required it to surrender just over 1.7 million of these).

* It is likely that (as in 2009) the Swedish energy company Vattenfall was the largest user of offset credits. The majority of the credits that it has surrendered come to date from HFC projects in China (these are industrial gas projects that EU Climate Action Commissioner Connie Hedegaard admits have a "total lack of environmental integrity". The EU will no longer accept these credits from April 2013, and there is some evidence that companies are starting to "dump" their holdings of these worthless credits before that deadline).


1The EU offsets data released on 2 May 2011 is cumulative for the 2008-2010 period. In the case of Elektrownia Belchatow, it shows that 7.45 million CERs have been handed in (“surrendered”) to date, with 365,000 CERs handed over in 2008, and a further 3 million in 2009.

2This figure assumes a €13 per ton price of carbon permits (EUAs), and incorporates a 10 per cent downward adjustment to take account of permit transfers relating to waste gases.

3ERUs are credits issued by the Joint Implementation scheme, which is a counterpart to the CDM that operates within countries that have Kyoto Protocol targets.