A UN board could rein in $2.7 billion carbon market to prevent the double dipping of CFC manufacturing incentives and carbon credit sales, as discovered to be happening in China.
Guest post by Ric Werme
UNITED NATIONS – An obscure U.N. board that oversees a $2.7 billion market intended to cut heat-trapping gases has agreed to take steps that could lead to it eventually reining in what European and U.S. environmentalists are calling a huge scam.
At a meeting this week that ended Friday, the executive board of the U.N.’s Clean Development Mechanism said that five chemical plants in China would no longer qualify for funding as so-called carbon offset credits until the environmentalists’ claims can be further investigated.
This is coupled with the production of the “ozone friendly” refrigerant HCFC-22 (chlorodifluoromethane). A byproduct of production is another gas, HFC-23 (trifluoromethane) which has been determined to be 11,700 times more powerful than CO2 as a greenhouse gas.
Not only are the manufacturers able to sell carbon credits for producing HCFC-22, they can also sell “certified emission reductions” (CERs) for destroying HFC-23, to the tune of about $100,000 per ton!
“The evidence is overwhelming that manufacturers are creating excess HFC-23 simply to destroy it and earn carbon credits,” said Mark Roberts of the Environmental Investigation Agency, a research and advocacy group. “This is the biggest environmental scandal in history and makes an absolute mockery of international efforts to combat climate change.
This is not a new problem. While looking for a decent image, I came across the 2007 article http://www.carbon-financeonline.com/index.cfm?section=features&action=view&id=10420 which notes:
The creation of carbon credits from the destruction of the potent greenhouse gas (GHG) trifluoromethane (HFC23) has been one of the most controversial issues during the early life of the Kyoto Protocol’s Clean Development Mechanism (CDM).
A by-product of the manufacture of the refrigerant HCFC22, many viewed HFC23 destruction projects as a cheap money-maker for a small number of industrial sites in a handful of developing countries that provided little discernible sustainable development benefit to those countries.
With CERs currently selling for €11 ($14)/t, the profit margins from HFC23 destruction projects are obvious. For example, Indian chemicals firm SRF, which operates one of the 10 registered HFC23 destruction projects, said in a recently released earnings report that it has, so far, sold 3.65 million CERs in the 2006-07 financial year for Rs4,050 million ($96 million). The sale of CERs has become a significant revenue stream for the company, second only to its technical textiles business and ahead of its chemicals and packaging units.
Current state-of-the-art production facilities, such as DuPont’s Louisville Works in the US, have HFC23 generation rates as low as 1.37%, so there may be some scope for the volume of CERs from new production, if allowed, to be considerably less than from existing plants.
DuPont is not involved in HFC23 destruction in the CDM market. But it has destroyed HFC23 as part of a set of 1991 internal goals to reduce GHG emissions. “We were doing this way before the carbon market,” says Mack McFarland, an environmental fellow with DuPont Fluoroproducts in Wilmington, Delaware.
That article has a graphic…
…that shows HFCs as half the CDM market in the first 3 quarters of 2006.
In 2008, http://blueskieschina.com/mambo/content/view/257/90/ noted
While China has long been ahead of India in terms of potential carbon credits generated by registered projects, India has dominated actual CER issue since January 2006.
But a bumper start to 2008 for China saw over 10 million CERs issued in January, accounting for over 90% of all CERs issued that month (chart 2). These credits, stemming from just four chemical plant HFC23 destruction projects, pushed China into first place in the issued carbon credit leaderboard for the first time since the CDM programme began.
There’s a lot more background at http://www.sourcewatch.org/index.php?title=Clean_Development_Mechanism_and_HFC-23_destruction
I guess it’s too late to invest in new HCFC-22 chemical plants.