The German Federal Environment Agency (UBA) said today its investigation into possible fraud in the upstream emission reduction (UER) market involves certificates for around 6mn t of CO2 equivalent (CO2e), of which two thirds could be recovered if needed.
The UBA has been investigating UER projects in China since September 2023 on suspicion that many either do not exist or cannot generate the appropriate amount of certificates to be counted towards the greenhouse gas (GHG) emission reduction quota. This has almost completely halted trade in UER credits.
The UBA has identified 45 projects with certificate capacity of around 6mn t CO2e. Of these, 1.3mn t CO2e have not been issued, and 2.6mn t CO2e have been issued but can theoretically be recovered. The remaining 2.1mn t CO2e are associated with completed projects that cannot be recovered or deleted.
The latter would be "cases for the public prosecutor's office," the UBA said.
Any reclaim procedure is dependent on irregularities being proven, and will mean the UER certificates are deleted, the UBA said. An issuer must purchase new certificates to compensate for its missing GHG savings or pay a penalty of €600/t CO2e.
But retrieving certificates that have been traded involves proving that the buyer, typically a fuel supplier, has intentionally acquired fraudulent certificates, the Federal Environment Ministry (BMUV) told Argus.
The UBA is examining 35 new project entries for 2024. It is unclear how many certificates will be available on the market in 2024 and 2025. The application for new projects ended on 1 July, and the crediting period for UER evidence ends on 1 September 2025, according to the UER regulation.
