Godfather of EU carbon market says CO2 offsets deserve second chance

BRUSSELS — Jos Delbeke once banned Europe’s heavy industry from offsetting its pollution by paying for emission cuts abroad. Now he thinks it’s time to give the idea a second chance. 

The retired Belgian official, who led the European Commission’s climate policy department until 2018, thinks Brussels is right to consider meeting part of the bloc’s next emissions-reduction target with international carbon credits. That puts him at odds with the EU’s own scientific advisers, who have warned against such a move. 

EU Climate Commissioner Wopke Hoekstra is expected to unveil a 2040 climate target on July 2 that permits the use of such credits, which would allow the bloc to fund climate-friendly projects abroad and count the emissions cuts toward its domestic target.

“I’m in favor of reopening the door for those credits,” Delbeke told POLITICO in an interview, “but we have to be very restrictive on the quality of those credits. And we have to be very alert and make our own decisions on the quantity that we are going to allow.” 

During his decades-long career at the EU executive in Brussels, Delbeke played a key role in establishing the bloc’s carbon market, known as the Emissions Trading System (ETS). The system obliges heavy industry, airlines, power plant operators and shipping companies to pay for their pollution by purchasing CO2 permits that decline in supply and rise in price over time, incentivizing them to switch to cheaper, cleaner alternatives.

In the 2010s, the ETS — the EU’s main tool for reducing emissions — allowed the use of international carbon credits regulated under a now-discredited global system known as the Clean Development Mechanism (CDM). This meant that instead of having to buy a pollution permit representing one ton of CO2 emitted in the EU, companies could also decide to purchase a credit representing one ton of CO2 reduced elsewhere. 

The approach backfired, threatening the entire system. Many CDM credits were questionable and did not represent verifiable emissions cuts. On top of that, they were cheap and plentiful, flooding the ETS and suppressing the price, undermining the economic incentive for EU companies to cut their domestic emissions. 

Delbeke first limited and then banned all foreign credits on the market. Offsetting has not been possible under the ETS since 2021.

The CDM system “was well negotiated, but it was horribly implemented,” said Delbeke, who now lectures on climate policy and carbon markets at the European University Institute. 

“Most of those credits came to Europe and were about to kill the ETS market,” he added. “It dampened the prices, and so along with a market stability reserve, we designed a policy to close the door to all credits coming from the CDM.”

Yet times have changed, Delbeke insisted. A new global framework regulating credits under the Paris climate accord was finalized in November with the EU’s support. But the bloc has also “learned its lesson” not to accept any and all projects included in an international system, and should instead set its own standards, he said. 

Delbeke also said there are alternatives to allowing credits within the carbon market, such as using them to offset emissions the ETS doesn’t cover: “Integrating them into the ETS is one option, but there are also other options.” 

The idea of using credits to meet part of the EU’s 2040 target has drawn fierce criticism from green NGOs and the bloc’s own scientific advisory board on climate change, which warned that foreign credits risk undermining climate efforts and threaten the ETS price. 

The European Parliament’s in-house think tank also warned on Thursday that “if international credits were readmitted, these concerns would remain today.” 

But Delbeke thinks the EU needs to be more flexible about how it can reach its targets amid economic difficulties, global trade tensions, the war in Ukraine and Donald Trump’s return to the White House. 

“If we are grown up in the discussion on carbon credits, being very restrictive on the quantity, very restrictive on the quality, it helps us to realize the targets that we are setting for ourselves in a world that is completely different from when we adopted the targets,” he said. 

“The [EU’s] climate law was before the invasion of Ukraine, before we had Mr. Trump in office and before his tariff war. We now want more industry in Europe, we want more on defense, that’s going to increase emissions,” he added. “So the world is looking very different today and I think the targets that were agreed then may turn out to be more expensive than anticipated at the time.”