EU demands new rules for controversial CDM gas projects

The EU's top climate change official yesterday waded into the debate surrounding alleged loopholes in the UN's Clean Development Mechanism (CDM), arguing that the offsetting scheme needs a "major overhaul".

Connie Hedegaard, EU commissioner for climate action, issued a statement indicating the EU could introduce new rules for the bloc's emissions trading scheme (ETS) that would limit the use of CDM-approved credits issued by controversial projects that aim to curb HFC greenhouse gases.

Projects that curb HFC-23, a potent greenhouse gas, have been accused by environmental groups of "gaming" the system and deliberately increasing emissions of the gas in order to then cut emissions in return for UN-approved carbon credits.

The UN board responsible for the CDM is investigating the allegations and six HFC projects in China and India are being reassessed by UN officials.

Hedegaard said that reforms were urgently needed to tackle the problem. "The CDM has been successful in some aspects but has also given rise to criticism, eg with regard to environmental integrity," she said. "As a first step towards a more advanced carbon market the CDM therefore needs a major overhaul."

She added that the EU was preparing to act independently to stop potentially compromised carbon credits entering the ETS.

"I have asked my services to prepare a proposal for a measure to introduce further quality restrictions on the use of credits from industrial gas projects in the post-2012 EU ETS," Hedegaard said.

Hedegaard's statement came as reports emerged suggesting the EU will provide clarification before the end of the year on how many CDM credits, known as Certified Emission Reductions (CERs), will be eligible for the ETS when it enters its next phase in 2012. Officials are preparing an impact assessment that is expected to be ready before the UN climate summit in Cancun in November, all owing member states to try to finalise the rules for the next phase of the scheme before the talks.

Earlier this week, the International Emissions Trading Association released an open letter to Hedegaard urging the EU to finalise its plans for the next phase of the ETS quickly and warning that uncertainty over the rules governing use of CERs had left confidence in the CDM market at a "very low ebb".