EU carbon reform proposals no threat to China-official

Reuters, Tuesday July 14 2009

* Tighter carbon credit rules can still benefit China
* Sectoral approach to carbon trade will "scale up" CO2 cuts
By David Stanway
BEIJING, July 14 (Reuters) - Proposals by the European Union to tighten a U.N.-run global carbon offsetting regime will help China rather than hinder it, a policy official with the European Commission said.
China has complained it will lose out if EU proposals aimed at eliminating low-quality carbon offsets were to be implemented.
But the new system will also "scale up" the volume of carbon credits and still benefit China, said Jurgen Lefevere, European Commission policy coordinator for climate change negotiations.
"There will be a continuing and even a strengthened role for China to play in the global carbon market and added benefits to the situation we are in at the moment," he told Reuters.
China has been one of the most active countries in the carbon credit system known as the "clean development mechanism", generating 60 percent of all U.N.-backed offsets produced through the scheme.
The CDM allows industrialised countries to meet mandatory carbon dioxide (CO2) cuts by buying offsets generated from clean energy projects in the developing world. The offsets are meant as an incentive to develop projects that would not otherwise have been financially viable.
The EU has said the system has thrived on easy but environmentally dubious projects such as industrial gas abatement and that rules should be tightened.
Such projects capture and destroy powerful greenhouse gases but also generate large volumes of offsets and there are growing doubts such projects are in the spirit of the CDM.
SECTOR BY SECTOR
Europe wants a "sector-based" approach instead because the current system is too limited in its scale and scope.
"We've been asking already for important reform to the CDM to strengthen its environmental integrity. For the EU, the CDM is not just about creating lots of cheap offsets," Lefevere said.
The current "project by project" basis of the CDM is not capable of delivering adequate CO2 cuts, he added.
The EU proposal will assign each sector a "benchmark" and award carbon credits if the sector makes cuts that go beyond the benchmark.
"It is beneficial in terms of scale. You can look at the entire cement sector, the entire steel sector, and it is also more ambitious for the environment because you no longer credit every reduction but only reductions beyond a baseline."
Lefevere said he had brought the proposals up during a meeting with Xie Zhenhua, vice-director of the National Development and Reform Commission responsible for climate change issues.
"He definitely confirmed China had an interest in the CDM and in strengthening the CDM," he said.
The sectoral approach to the CDM is part of the EU's negotiating text in talks for a broader global climate treaty, which the United Nations hopes to seal at a major conference at the end of the year. (Reporting by David Stanway; Editing by David Fogarty)