ETS under risk of fire
The FT reports how carbon traders and green groups announce fears that the proposal to include woodland within the EU’s Emissions Trading Scheme could pose a threat to the market.
“Under the proposed plan, forests and other land would be credited as stores of carbon, allowing landowners to sell the resulting permits on to factories that emit gases.
…Many in the carbon market fear that fires or drought could result in a huge release of stored carbon as trees die, triggering a jump in the carbon price and crippling the trading system.
…Including forests could also flood the market with cheap credits, rendering the price useless as a means of encouraging businesses to cut emissions.
Mitchell Feierstein, head of emissions products at Cheyne Capital Management in London, said if extended, the scheme should only apply to reforestation or afforestation.
To guard against problems such as forest fires, he said “reinsurance products need to be created which guarantee that the emission reductions generated from reforestation and afforestation are quantified, verified and their permanence is a certainty”.
The Commission, which is looking to tighten the scheme from 2013, also has doubts: an official recently warned carbon sinks “may easily turn into a source of carbon”.
A spokeswoman for Stavros Dimas, the EU environment commissioner, said his department was conducting an impact assessment. He will announce proposals within months but they would have to be agreed by a majority of national governments.”