Spain Needs $466 Million in Carbon Credits to Meet Kyoto Limit

Spain may need to buy at least 355 million euros ($466 million) of carbon emissions permits to meet its obligations under the Kyoto Protocol, Agriculture Minister Miguel Arias-Canete said.

The country will need at least 67 million metric tons of emissions permits to cover greenhouse gas emissions that exceed the volume allowed under the 1997 Kyoto agreement, Arias-Canete told a parliamentary committee last week.

“The government needs a lot of permits,” the minister said. Its liabilities “are far higher than forecast by the previous government so the situation is really worrying.” Under the Kyoto Protocol, developed nations can meet their goals by buying so-called Assigned Amount Units from other countries with surplus permits, or by investing in emissions reductions in developing countries in exchange for carbon offsets.

Spain has already spent about 750 million euros over the past five years accumulating emission permits and offsets after the economic boom that followed the Kyoto negotiations saw Spanish emissions overshoot. Spain’s 2010 greenhouse gas emissions are about 22 percent higher than they were in 1990 compared with a Kyoto-mandated ceiling of a 15 percent rise over 1990 levels by 2012, Arias-Canete said.

United Nations carbon futures for December 2012 delivery gained 3.9 percent to 4.24 euros a ton on the ICE Futures Europe exchange at 4:45 p.m. in London.

Two Recessions

The volume of carbon dioxide emitted by the country’s factories, power plants and transport system in 2006 was 50 percent higher than their 1990 level, Arias-Canete said.

While two recessions since then have reduced emissions, those reductions have fallen more at the factories and power plants covered by the European Emissions Trading System compared with the transport system and waste management industry which are the responsibility of the government.

Manufacturers and utilities “had many permits assigned to them and they have had a surplus,” Arias-Canete said. “There are industrial plants open simply to justify receiving emission permits and sell them in the market.”

The European Commission has set Spain a target of reducing its budget deficit to 4.4 percent of gross domestic product this year from about 8 percent in 2011. The International Monetary Fund forecast last month the deficit will be 6.8 percent as declining output crimps tax receipts and pushes up unemployment claims.

Economy Minister Luis de Guindos said the economy may shrink by 1.5 percent this year.

To contact the reporter on this story: Ben Sills in Madrid at bsills@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net