Companies will be able to use ERUs issued before 2013 to comply with EU carbon caps

The European Commission has published information concerning Track 1 ERUs: Companies will be able to use emission reduction units (ERUs) issued before 2013 to comply with EU carbon caps, causing offset prices to drop sharply.

The European Commission will soon mark these ERUs as eligible for compliance in the EU emissions trading system (ETS) emission. The operation will be carried out on 21 November.

ERUs from projects located in countries without post-2013 legally-binding emission reduction commitments are eligible for use in the EU ETS only if they represent emission reductions which took place before 2013.

In order to apply quality restrictions to offset credits in the union registry, the Commission decided to label them as “eligible” or “ineligible” for compliance purpose.

However, a “significant” proportion of track 1 ERUs – where emissions credits are approved by the host country itself – issued before 2013 by non-EU parties to the Kyoto Protocol was marked as “pending/ineligible” while the Commission worked to obtain complete information on them. “The data has now been provided for ERUs issued by all third parties and the status of ERUs issued before 2013 will be changed from pending/ineligible to eligible,” the Commission said on Friday.

This announcement has had consequences: Offset prices crashed. “This was the last thing the market needed,” said one trader at a bank. A second source at a trading house said that many participants had to buy additional ERUs when those they held in the registry were marked as pending, in order to be sure to be able to cover their selling orders for delivery in December, and following the announcement they found themselves with extra credits they could sell.

DG CLIMA indicates that further details regarding ERUs marked as “pending” or “ineligible” which will have to be moved to a KP account, will be made available on their website by 20 December 2013.

maria soler