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Do international carbon credits combat climate change?

The European Commission proposed a climate goal for 2040, which allows countries to use carbon credits purchased from developing nations in order to reach the EU target for the first ever.

What does that mean? And why did the EU's move on Wednesday cause some criticism among scientists and campaigners?

What are carbon credits?

Carbon credits or offsets are projects that fund projects abroad to reduce CO2 emissions in lieu of reducing your own greenhouse gas emission.

For example, converting petrol buses in a city to electric or restoring forests in Brazil are examples. The buyer can use the "credits" to reach its climate goals, while the seller receives funding for their green project.

The system, according to its supporters, provides much-needed funds for developing countries' efforts to reduce CO2 emissions and allows them to work together with other countries in order cut emissions globally.

The reputation of CO2 credit has been damaged by a series of scandals where projects that generated credits failed to provide the benefits claimed for climate change.

Why is the EU buying them?

Carbon credits purchased from other countries could cover up to three percentage points of the EU 2040 target, which is to reduce net emissions by 90 percent from 1990 levels.

In order to achieve the EU's climate goals, countries must reduce their emissions completely at home.

Last year, the EU's executive commission said it hoped that the EU would agree on a 90 percent reduction in emissions by 2040. Carbon credits were not mentioned.

Since then, the geopolitical turmoil and economic struggles of European industries has fueled political resistance. Governments from Germany to Poland have demanded a softer goal.

The Commission responded by saying it would introduce flexibility and chose carbon credits to achieve the 90% reduction in emissions while reducing domestic steps required to get there.

The EU countries, the European Parliament and the European Commission must all agree on the final goal.

What are the risks?

Carbon credit project developers and countries like Germany welcomed the EU plan as it would boost climate finance.

Environmental campaigners warned that the EU is shirking its domestic CO2-cutting effort and urged caution in relying on low-value, cheap credits.

Climate science advisors in the EU also oppose buying credits under 2040 targets, as they say that this would divert funds from local clean industries.

After a glut of cheap credits that had weak environmental benefits led to a crash in carbon prices, the EU banned international credit from its carbon market.

In an effort to reduce the risk, the Commission announced that it would purchase credits in accordance with the global market and trading rules for carbon credits being developed by the U.N. They include quality standards that aim to avoid the problems unregulated credit trading faced in recent times.

Next year, Brussels will also propose specific standards on the quality of the carbon credits that the EU purchases.

How much will it cost?

The EU does not yet know. Carbon credits can range from a few dollars for a tonne CO2 to over $100 depending on the project.

According to EU emission records, the bloc would have to purchase at least 140 millions tonnes of CO2 to meet 3% of its 2040 goal. This is roughly equal to the Netherlands total emissions for last year.

A senior official of the Commission said that the bloc is determined to not hoard cheap junk credit.

"I don’t think it would add any value." "The credits that we see on the voluntary carbon markets today are extremely cheap and this probably reflects an absence of high environmental integrity," said the senior official. (Reporting and editing by PhilippaFletcher; Additional reporting by Virginia Furness)

(source: Reuters)