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In a recent collaboration Sandbag has been working with the [Wuppertal Institute](http://wupperinst.org/en/home/ “”) on a report investigating the benefits of the carbon market for Germany. Specifically this work has looked to better understand to what extend German stakeholders have been involved in the Kyoto Protocol’s flexible mechanisms – namely the Clean Development Mechanism (CDM) and Joint Implementation (JI) – and whether or not they have benefited from the scheme. Carbon markets are complicated political constructions, designed to create restrictions and incentives where there previously were none. As such attributing benefits can be difficult. To answer this question, we looked into German investments in the two mechanisms as well as investigating the role of German consultancies, auditors, financial market players and technology providers. As part of this collaboration Sandbag looked specifically at how German companies have used credits to comply with obligations under the EU emissions trading scheme (ETS).

German investors have participated in 265 CDM and 42 JI projects, 12 of which are located in Germany. These projects will issue some 222million CERs and 13million ERUs until the end of the first Kyoto commitment period and will represent 16% and 3% of total credits issued. German investors come from a range of different sectors, particularly the energy utilities, but also industrial sectors including chemical and steel as well as financial institutions like the German Development Bank, KfW, and other project development companies. One of the most significant investors has been energy company RWE, who has been involved in some 103 registered CDM and 8 JI projects located across 24 countries.

The main market for CDM and JI credits has been the EU ETS and German companies have been quick to make use of this opportunity. Within German ETS sectors an offset budget of 22% of PII allowances was set, giving them a de facto budget of 441million credits. In total during Phase II of the EU ETS German installations have used 303million offsets (170m CERs and 133m JI), or 69% of their total budget. Germany’s offset usage has by far and away surrendered the greatest number of offsets, accounting for 29% (or 303m) of the total 1.1bn offsets surrendered into the EU.
Within Germany the most prolific users of offsets has been the power sector, surrendering 178million (106 million CERs and 59ERUs) during Phase II. The next largest users of offsets are the iron & steel and cement sectors surrendering 58million and 31 million offsets respectively. While the volume of offsets used by the energy intensive sectors is lower than the power sector they have, in fact, used a greater proportion of their budget, for example the iron & steel and cement sectors have used 92% and 90% of their budget respectively. In contrast the power sector has only used 61% of its budget.

The majority of credits being used for compliance by German companies come from a limited number of countries, namely China, India and South Africa, and project types, namely HFC and N20 mitigation. Some German companies, specifically BASF and Bayer, has been particularly active in the development if JI projects, some of which have been within their own operations in Germany. Subsequently they have been able to use credits they generate to count towards their obligations under the EU ETS.

To get a full overview of which German stakeholders benefited from the carbon markets click [HERE ](http://www.jiko-bmu.de/english/background_information/publications/doc/1349.php “”)to download the full report, or see out [reports page](http://www.sandbag.org.uk/reports/ “”).