CORRECTION: Colombia carbon tax-linked offset cancellations slow on supply, administrative bottlenecks
The surrendering of Colombian offsets to comply with the country's carbon tax has slowed this year due to an extreme supply squeeze and administrative delays. (Corrects to clarify situation with VVBs and current verification activities in Colombia)
The surrendering of Colombian offsets to comply with the country's carbon tax has slowed this year due to an extreme supply squeeze and administrative delays. Under 540,000 CERs have been voluntarily cancelled by emitters since the end of 2018 to cover their obligations with regards to the Latin American country's carbon tax.
That's a fraction of the 2.8 million retired during the same nine-month period last year, according to figures compiled by Carbon Pulse. The number of voluntary offsets used against the tax this year has also dropped, certifiers said.
Gold Standard reported some 26,500 VERs retired against the tax so far in 2019 – well below the nearly 197,000 cancelled during the first nine months of 2018. And Verra reported another 6.2 mln VCS units from four projects annulled against the tax this year. While that was above the roughly 2 mln cancelled in 2017, it risks coming in below the 9.2 Mt retired in 2018. Some 17.2 mln Colombian VCUs have now been surrendered towards the tax, out of a total 17.8 mln units issued in the country since 2017 and the overall 18.2 mln handed out to date.
"We're out of credits," said Susana Velez Haller, a Bogota-based climate change consultant with project developer South Pole.
"We're developing new projects and undergoing new verification processes, but they're small and it takes time. And even when [the credits] are issued, there won't be as many as before," she told Carbon Pulse by phone. "Demand is so high that it will never be met."
Some 4.15 mln Colombian CERs have been voluntarily annulled against the tax as of last week, with energy companies Biomax, Exxon Mobil, Chevron, Terpel, Zeuss Petroleum, and Petroleos del Milenio as the main users.
JUST PAY IT
The credit pipeline from Colombia's existing carbon offset projects could grow to up to 10-14 Mt annually at most in the coming years, experts estimate, with much of those units coming from forest-based initiatives that are still being developed.
"We're pushing the environment ministry to facilitate the development of new projects ... but I think the finance ministry is aiming to have more companies pay the tax," South Pole's Velez Haller said. She added that the government does not appear to be considering any changes to the tax rate or credit eligibility rules.
This abridged article was originally published on 9th September by Carbon Pulse, subscribers can read the full piece here.