International carbon credits as a safety reserve
Ensure the integrity of international carbon credits
© fstopimages/Malte Müller
The European Union (EU) is currently considering what role international carbon credits should play in achieving its 2040 climate target. In a policy brief, the Oeko-Institut explores key options and makes recommendations for the use of international carbon credits.
Regarding the purpose for which international carbon credits should be used, the authors recommend that carbon credits should – at least in part – serve as a safety reserve in the case that the EU fails to meet its climate target of reducing emissions by 90 per cent by 2040 domestically. This approach could address the significant uncertainties, for example, concerning the potential climate contribution of the land-use sector. If the sector does not deliver the envisaged contribution, international credits could be used as a safety reserve. There are various reasons why it would be problematic to use the credits directly within the EU’s Emissions Trading System. However, it is possible to integrate them via the market stability reserve.
Another key question is how a high integrity of the carbon credits can be ensured. In the past, carbon credits have often failed to deliver on integrity. For this reason, the authors recommend using the new ‘Paris Agreement Crediting Mechanism’ as the basis for integrity criteria, complemented by additional EU criteria and safeguards. Furthermore, it is important that countries selling carbon credits can count a part of the mitigation outcomes towards their own climate targets. To avoid conflicts of interest, third-party auditors should not be paid by the project developers. Lastly, additional provisions are necessary to ensure that emission reductions are not double counted.
This policy brief was produced by the Öko-Institut e.V.
