China, Beneficiary of EU’s Cap & Trade, Now Shirks its Responsibilities

January 16th, 2012 by Susan Kraemer

As of of January 1st, 2012, China’s renewable energy projects will no longer be eligible for funding from the EU cap and trade market, through the Clean Development Mechanism (CDM) that allows polluters in the EU to offset carbon emissions at home by building clean energy abroad.

So in December China rushed through 139 CDM-eligible projects in a last-ditch effort to gain the last of the funding for clean energy development before the cut-off date.

Under the European Trading System (ETS) cap and trade system, polluting plants have to pay for every ton of greenhouse gases they send into the air, and have to reduce the amount every year. If they can’t reduce their emissions enough, they have to buy credits instead, with the funds going to develop clean energy in developing nations.

But the EU, faced with an oversupply of offsets available, has decided to limit eligibility to clean energy projects within only a newly revised list of “Least Developed Nations”.

India, Brazil, Morocco, Egypt, and China are among former recipients of CDM funding that are now deemed too developed to qualify for the cap and trade funds.

China has been by far the world’s biggest supplier of carbon offsets to the ETS, with its speedy ramp-up of renewable energy projects. In December it rushed to help as many projects as possible win the right to sell offsets to Europe in the years ahead. Normally, it holds one meeting a month to approve new clean energy projects. In December it held two, and by year end was able to green-light a total of 714 projects for CDM funding, dated 2011.

The oversupply of available clean energy projects has driven down the price of carbon on the EU cap and trade market to around 7 euros ($9) per tonne. (But with California ramping up its own cap and trade program, and Australia’s market which is set to begin in 2015, the new rule from the EU might not impact China’s development of renewable energy too much in the long run.)

About one in five of China’s renewable energy projects have been the beneficiaries of the Europe’s cap and trade program.

But the EU decision comes at a time when China is pushing back against the other side of the equation, participating in the EU ETS trading as a polluter, by paying in to the very CDM fund that financed its own clean energy program.

All airlines that land or take off in Europe as of the 1st of January now have to pay into the EUs cap and trade program ETS polluters’ fund that supplies the money that pays for clean energy development, the CDM.

At the current low of a mere 7 euros a ton of carbon dioxide emissions, the carbon fee is hardly prohibitive and would add only $2 to $15 per passenger, depending on flight length.

Yet even though China has been the beneficiary of the resulting carbon funding so far – now its airlines are adamantly refusing to participate in the EU ETS as a contributor.









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