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He likes, for example, the inclusion of afforestation, reforestation and forestry offsets for the first time. The new bill, approved Oct. 7, says companies can use forestry offsets to cover up to 5 percent of their emission reduction requirements post-2012 (during which offsets of all kinds can total 4 percent of 2005 emissions -- more on this later).
He also has no qualms with tighter overall caps than those proposed by the European Commission in January.
But he says the parliamentarians blew it as far as offsets from the Kyoto Protocol's Clean Development Mechanism (CDM) are concerned -- and he's not alone.
"There's a lot of, well, angry discourse in the CDM community," said another project developer, echoing others who didn't want to be on the record until they had time to review the documents.
"They basically moved the goalposts," says Brodmann, who has had time to review the documents and says the angry discourse flows from an amendment that will essentially bar any company that takes full advantage of the program as it exists today from using offsets to meet its EU ETS obligations after 2012.
Don't Buy That Offset!
Specifically (and brace yourself, this gets complicated), the amended bill says that any company that uses CDM offsets totaling more than 6.5 percent of its 2005 emissions to meet its EU ETS obligations this year -- or in any year through 2012 -- will not be allowed to use offsets purchased after 2012 to meet its EU ETS obligations in the next phase of EU ETS, which runs from the end of 2012 through 2020.
Neither, for that matter, will companies that buy offsets now and bank them for the next phase.
Not that banking is disallowed -- indeed, it is explicitly permitted under current rules -- but companies that do choose to buy CDM offsets now for use in the next phase will be forced to gobble up as many as they can before the end of 2012 -- because they won't be allowed to use any post 2012 offsets for compliance purposes (no word on what happens if companies retire their banked allowances voluntarily).
Companies that neither cross that 6.5 percent threshold in this phase nor try to cash in banked allowances next phase will, on the other hand, be allowed to buy and use offsets from 2013 through 2020, during which they can annually purchase and use offsets equal to 4 percent of their 2005 emissions.
Avril Doyle, the Irish Member of European Parliament who is steering EU ETS legislation in Parliament, says the bill simply presents a choice for companies: load up now, or hold your peace through 2020.
"This wording ensures that all operators can use JI/CDM of a high standard where the host countries have ratified the Copenhagen climate agreement, in the period 2013-2020," she wrote in a June draft of the current legislation. "Companies will obviously do whichever gives them the largest entitlement."
Bait and Switch?
Brodmann says that's not the point.
"It calls into question the principle of legal certainty," he says. "In the current phase, member states are allowed to set their limits, and most have limits above 6.5 percent. This is a violation of good faith and creates a lot of uncertainty in the market, because now installations don't know what the next penalty will be."
What's more, project developers have been using the current rules to promote the idea of buying allowances now and banking them for the future -- something they say incentivizes early action and starts funneling money into developing world reductions today, rather than three or four years down the road.
The Reasoning
Advocates of the amendments say the new bill promotes reductions inside Europe, and some even argue that domestic abatement is cheaper in the long term than is promoting clean development in the developing world.
As for the 6.5 percent figure, it first showed up in its current context in a June draft of the bill (PDF), when Doyle argued that the European Union's average annual reduction in the period 2008 through 2012 will be 6.5 percent of 2005 emissions, and that companies shouldn't be encouraged to use offsets for an amount greater than the pan-European reductions over that period.
That came from a January European Commission proposal encouraging legislators to learn from past mistakes in drafting new legislation.
