23/4/2004
EP vote paves the way for global fight against climate change

The European Commission welcomes the European Parliament's vote in favour of a new Directive that will give an important boost to the development of greenhouse gas emission reduction projects. The new Directive will allow European companies participating in emissions trading to count credits from emission reduction projects around the world towards their obligations under the European Union's emissions trading scheme. The scheme builds on the project-based mechanisms "Clean Development Mechanism" and "Joint Implementation" created by the 1997 Kyoto Protocol.

Environment Commissioner Margot Wallström said: "The linking of the Kyoto mechanisms to our emissions trading scheme, which is the largest in the world, will reduce costs for the companies participating in emissions trading and provide investors in green technology with the certainty they need. It will also promote the transfer of environmentally sound technology to developing countries. So overall, it is a very important measure in the fight against climate change."

The Parliament's positive vote comes less than nine months after the Commission proposed the Directive in July 2003. The swift agreement reaffirms the high priority that the EU gives to taking concrete action to tackle climate change, and the central role that the Kyoto Protocol plays in European climate change policies.

Joint Implementation and the Clean Development Mechanism

Under the Kyoto Protocol, the project-based mechanisms "Clean Development Mechanism" (CDM) and "Joint Implementation" (JI) allow governments to conduct emission-reduction projects abroad and count the reductions achieved against their own Kyoto targets. JI projects can be undertaken in other industrialised countries that have quantitative emissions reduction targets under the Kyoto Protocol. CDM projects can be hosted by developing countries, which have no quantitative targets.

The rationale behind these mechanisms is that greenhouse gas emissions are a global problem and that the place where reductions are achieved is of less importance. In this way, reductions can be made where costs are lowest. In addition, JI and CDM projects will transfer environmentally sound technologies to the host countries, which will assist them in reaching their sustainable development objectives.

The Kyoto Protocol allows credits for CDM projects to be issued for emission reductions achieved from the year 2000 onward, while emissions reductions achieved under JI projects will be credited from the year 2008 onward. Detailed rules and supervisory structures have been set up to ensure that the system functions smoothly.

The proposed Directive will allow companies in the EU trading scheme to use the credits from such projects, once they are issued, up to a percentage of their allowed emissions. The limit will be decided by each Member State and will guarantee that a significant reduction of greenhouse gas emissions still takes place within the European Union, and not abroad.

Companies will be able to use all credits that are issued in accordance with the Kyoto Protocol's rules under the EU emissions trading scheme. Excepted are credits from nuclear energy projects, which are also disallowed under the Kyoto Protocol, and credits from 'carbon sinks' (temporary storage of carbon in forests). The use of credits from 'carbon sinks' will be reviewed by the Commission in 2006. The proposed Directive also requires Member States to ensure that the environmental and social impacts of large hydroelectric power projects are addressed through the application of relevant international criteria and guidelines when they approve such projects.

The Council is expected to formally approve the proposed Directive at one of its next meetings. Once formally adopted, the Directive will be published in the Official Journal and enter into force on the day of publication. Member States will then have 12 months to transpose it into national legislation.

Emissions trading in the enlarged EU will start on 1 January 2005. It will cover more than 12,000 energy-producing and energy-intensive plants. Member States will set limits on their greenhouse gas emissions by allocating "emissions allowances" to them. When trading starts next year, companies that do not use all their allowances will be able to sell them to companies that have difficulties to keep their emissions within the allocated allowances. These latter companies are also likely to be interested in credits from CDM and JI projects. Emissions trading is an innovative system that takes advantage of market forces and will make sure that emissions are cut where it is cheapest, thus allowing the EU to achieve its Kyoto targets at the least possible cost.

For more information, see Commission's "Climate Change" website at:

http://europa.eu.int/comm/environment/climat/home_en.htm