EIA urges companies to stop HFC-23 credit trade
[ added 17 June, 2010 ]
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The UK Environmental Investigation Agency (EIA) is asking 10 major UK companies to set an example and cease trade with HFC-23 carbon credits that have become “perverse” incentives.
New evidence of firms artificially inflating their greenhouse gas emissions in order to reap the benefits of the carbon treating scheme have lead the United Nations to openly consider a formal review of their Clean Development Mechanism (CDM).
The CDM, a tool under the Kyoto Protocol, allows companies to invest in carbon-cutting projects in emerging countries and to gain in return carbon offsets that can be used against their own emissions. In 2009, all CDM projects summed up to $2.7 billion.
The most lucrative CDM projects involve chemical plants, mostly in India and China, that destroy the potent greenhouse gas hydrofluorocarbon-23 (HFC-23). However, latest findings show that a good part of these projects may have inflated their emissions in order to destroy them and sell more offsets.
HFC-23 is an unwanted byproduct of manufacturing the refrigerant gas HCFC-22. The CDM however has created an unwarranted market for the production of the pollutant gas, sometimes to the maximum amount allowed, simply to reap the financial benefits of subsequently destroying it. This is demonstrated by the evidence that plants produce less HFC-23 during periods when they are unable to request CDM offsets, called Certified Emissions Reductions (CERs).
The destruction of HFC-23 can be carried out for just €0.17 per tonne of carbon dioxide-equivalent (CO2-eq) – but when sold on the EU Emissions Trading Scheme (ETS) market it can easily command as much as €12, which is 70 times more than it costs to destroy the gas.
In regards to this perverse effect of the CDM as well as the fact that about half of the HFC-23 production in developing countries is not at all covered by the CDM and therefore vented into the atmosphere, the UK Environment Investigation Agency is convinced that the destruction of HFC-23 has to be regulated outside the CDM through direct payment for HFC-23 incineration.
“The CDM has made HFC-23 so valuable that, at least for some manufacturers, it has become the product, not the by-product,” said EIA Senior Campaigner Clare Perry. “Under the Montreal Protocol, all HFC-23 emissions could be addressed for a tiny fraction of the cost.”
The EIA lists as UK companies the most involved in financing HFC-23 destruction projects the Barclays Bank, British Gas, the Royal Bank of Scotland, Morgan Stanley, Goldmann Sachs, Corus UK Ltd., as well as the UK-based carbon trading groups Climate Change Capital and Natsource. The environmental group urges these companies “and all others dealing in the fundamentally flawed and environmentally detrimental HFC-23 offset credits, to take a stand and simply stop using them”.
BeyondHFCs welcomes the propositions of the EIA and yearns for the perverse incentives to be ceased soon.
