Hydro CO2 offsets ineligible for ECX trade

ECX ban on large hydro CERs keeps carbon offsets from >20 MW dams out of EU ETS futures and spot trading, aligning with CDM guidance, Kyoto Protocol aims, and World Commission on Dams recommendations.

Carbon emission offsets generated by large hydroelectric dams will not be eligible to trade on London's European Climate Exchange, the exchange said.

The exchange said after consulting its members it decided to continue excluding those carbon offsets, called Certified Emissions Reductions (CERs), generated by hydro dams larger than 20 megawatts in capacity, from being eligible to trade through its carbon trading scheme futures and spot contracts.

Under the Kyoto Protocol's Clean Development Mechanism, companies can invest in clean energy projects, like hydro dams, in emerging economies, and in return receive CERs which they can use via an EU-Kyoto link under the European Union's Emissions Trading Scheme.

In an effort to clarify recommendations from the World Commission on Dams, EU nations last year, aiming to link carbon markets, voluntarily harmonized their rules on the eligibility of large hydro CERs, though this is still considered a grey area by market players.

According to UN data, there are 208 large hydro dams registered under the CDM, 158 of which are in China, where low-carbon economy concerns continue to shape policy.

These projects have generated 10.6 million CERs to date as the Kyoto carbon trade scales rapidly, and are expected to generate a total of 153 million by 2012.

The European Climate Exchange, owned by Climate Exchange plc, is the world's largest marketplace for greenhouse gas emissions credits.

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