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Wednesday, July 23, 2014
- For years, European governments and corporations have made use of a loophole in the Kyoto protocol on climate change to make exorbitant profits. According to some sources, this lucrative scheme has caused more pollution than ever before while lobbyists in Brussels have methodically undermined the European Commission’s decision to put a stop to it.
The Kyoto protocol allows European companies to ‘offset’ their excess emissions of greenhouse gases by buying emissions reductions in developing nations. This provision is called the Clean Development Mechanism (CDM). The eligibility of the overseas projects and the issuance of emission credits – which in this case are called Certified Emission Reductions (CERs) – are controlled by a council at the U.N., the CDM Executive Board.
In June 2010, two environmental NGOs – CDM Watch, based in Bonn, and Environmental Investigation Agency (EIA), with offices in Washington, DC and London – discovered that European governments and corporations were grossly misusing the CDM. Fifty-nine percent of all CERs originated from the same 19 projects, out of a total pool of 2,800 U.N.-registered projects. These 19 projects all produced HCFC-22, a refrigerant gas that is banned in the U.S. and Europe under the Montreal Protocol on Substances That Deplete the Ozone Layer because of its ozone-depleting properties.
Just weeks before the 2010 U.N. COP16 climate talks in Cancún, Europe’s climate Commissioner Connie Hedegaard proposed a ban on all HFC-credits in the European system of emissions trading (ETS) to take effect Jan. 1, 2013. On that date, the second phase of the ETS is due to end, after which new rules could apply.
Industry lobby groups and business organisations resisted the ban. Brussels-based NGO Corporate Europe Observatory made use of Freedom of Information Regulations here to obtain documents and reconstructed the full story.
BusinessEurope is the most influential lobby group in Brussels, representing 40 industrial and employers’ federations from 34 European countries. In October 2010, BusinessEurope’s Director- General Philippe de Buck sent a letter to Hedegaard and Commissioner of Industry and Entrepreneurship Antonio Tajani in which he spells out his opposition to limiting the use of credits from the CDM.
Italian energy giant Enel is involved as an investor in seven of the 19 HFC-projects receiving CERs. Next to that, the company is one-third owned by the Italian government. In November 2010, the head of European institutional relations at Enel, Roberto Zangrandi sent a letter to several members of European Parliament (MEPs) stating that, “it is critical to trust the system and the procedures of the UNFCCC [United Nations Framework Convention on Climate Change] and CDM in order to ensure the integrity and credibility of this mechanism.”
But just two weeks earlier, Zangrandi sent a letter to Antonio Preto, cabinet member for Tajani. In the letter, Zangrandi invites Preto to have a friendly talk about a serious problem: Zangrandi explains that if a ban would come into force on Jan. 1, his company would loose “at least 20 million credits with a significant value”.
In an interview with carbon markets website PointCarbon.com in November, Simone Ruiz, European policy director at the International Emissions Trading Association (IETA), states that the Directorate- General for Industry and Entrepreneurship would focus on moving the date forward. According to PointCarbon.com, a delay of just four weeks would mean that 30 to 100 million extra HFC-credits would enter the European market. This way, companies would be able to make full use of the credits they had invested in.
According to Eva Filzmoser, programme director of CDM Watch, lobbyists behaved in a very unethical way. “The right thing to do is: insist on a thorough investigation, wait for the findings and take a decision,” she told IPS. “Many investors only took the decision to invest in these projects after the European Commission had opened the door for possible restrictions in 2008. It was a calculated risk and most investors have already been abundantly rewarded. Furthermore, we have informally been told by investors that they knew Indian and Chinese plants were increasing their production for the sake of credits.”
Eventually the industry got what it asked for – when the Commission released its final proposition on Jan. 21, 2011, the date for the ban had been moved from Jan. 1 to Apr. 30. According to some estimates, this will result in 52 million extra CERs flowing into the European market – allowing companies to emit an amount equal to the annual emissions of Belgium.
*This is the second part of a two-part series on how European governments and corporations are profiting from a loophole in the Kyoto protocol on climate change.