Luxembourg Probes Possible Wrongdoing in China CO2 Credits
'The Prosecutor General's office is currently investigating the matter,' a spokesperson at Luxembourg's ministry of environment, climate and biodiversity told Bloomberg, declining to comment further.
A spokesperson for Luxembourg's public prosecutor's office said the case concerns a complaint forwarded by the ministry in March and is 'currently being processed.' The office hasn't yet decided what action to take, the person said. Both the ministry and the prosecutor's office declined to name the companies or projects involved.
The development follows an investigation launched in Germany last year, which led authorities in Europe's biggest economy to reject carbon credits tied to projects in China. Berlin's public prosecutor has also been investigating 17 employees at the verification bodies responsible for monitoring the projects.
The probes highlight the difficulties companies in Europe face in navigating carbon credit markets as they look for ways to bring down their reported emissions in compliance with local regulations and climate targets. At the same time, the European Commission has proposed allowing member states to use carbon credits produced outside the region to make it easier to reach the bloc's 2040 emissions reduction target.
The China-based projects being probed have been operating within a framework created under the European Fuel Quality Directive, and were run by international corporations that used European auditors. Germany's federal environment agency has previously indicated that it faces obstacles in advancing its probe, in part as investigators struggle to get access to the relevant projects in China.
A carbon credit is supposed to represent one metric ton of CO2 that's been avoided, reduced or removed from the atmosphere. Credits tied to claims that emissions are being avoided have come under intense scrutiny in recent years after a number of underlying projects were found to have exaggerated their climate benefits.
A study published earlier this month found that market-based checks and balances systematically fail to guarantee credit quality, amid what the study's authors characterized as perverse incentives for auditors.
The China-based credits under investigation are so-called upstream emissions reductions , which allow companies to report lower emissions by funding measures that claimed to reduce pollution during the production of oil and gas. UERs have tended to trade at much higher prices than credits tied to the so-called voluntary carbon market or Europe's emissions trading system.
UERs traded at around €440 a ton in 2022, but are currently priced at around €140 a ton, according to Argus Media.
Earlier this month, the German environment agency won dismissal of a suit in an administrative court against its decision to cancel a project developer's UER certificates. According to the judges, the project didn't achieve any additional emission reductions.
Whistleblower allegations last year helped spark Germany's investigation into the UER market. The country's 2024 probe led to the revocation of $20 million worth of credits after the identification of 'irregularities' in eight different projects in China.
With assistance from Karin Matussek, Irina Reznik and Peter Chapman.
This article was generated from an automated news agency feed without modifications to text.
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