... A study by Ben Miller
of America's National Oceanic and Atmospheric Administration
and colleagues published recently found that in fact emissions
fell by 40% or so between 2006 and 2009. But at a very high
price.
+------------------------------------------------------------------------------+
The Smoking Greenhouse Gun: A Greenhouse-gas Scam
2010-09-02 21:01:09.353 GMT
An alluring trade in "supergreenhouse" gas emissions is
coming under scrutiny
Sept. 4 (The Economist) -- ONE of the curiosities of carbon
markets is that they do not just trade in carbon. Other
greenhouse gases can be given a value, too—sometimes a very
high one. Claims that these prices promote scammery are now
prompting some searching questions.
The gas at the centre of the controversy is HFC-23, a
greenhouse gas which, on a weight-for-weight basis, is 14,800
times better at trapping heat than carbon dioxide. HFC-23 is
produced as a by-product of the manufacture of HCFC-22, an
ozone-destroying refrigerant. HCFC-22 is banned in developed
countries, but developing countries can keep making it until
2030.
The acronyms do not end there. Under the Clean Development
Mechanism (CDM) of the United Nations HCFC-22 producers in
developing countries that destroy, rather than release, their
HFC-23 can be eligible for Certified Emission Reduction (CER)
credits, which can then be traded in the European Union's
emissions-trading scheme. This allows companies to buy extra
emissions reductions to meet their cap-and-trade obligations,
and in so doing to transfer money to schemes reducing emissions
in developing countries.
Wind farms, solar programmes and other clean-energy
projects are all eligible for CERs. But because destroying a
tonne of HFC-23 is a lot cheaper than avoiding the emission of
more than 10,000 tonnes of carbon dioxide, HFC-23 destruction
has become the CDM's principal source of emissions credits.
According to Sandbag, an outfit that monitors carbon markets,
59% of the CERs used as offsets in the EU cap-and-trade scheme
in 2009 came from HFC-23 projects, representing more than
€500m ($695m) in credits.
You cannot simply set up an HCFC-22 plant and demand cash;
eligibility is limited to companies which were already
producing the gases in 2000-04, and companies are capped in the
amount they can receive. But there is little incentive for
approved incineration schemes to reduce the amount of HFC-23
that they produce. Quite the reverse, argues CDMwatch, a group
that monitors the offset market. It says it has shown the CDM
executive board that some plants have reduced their HFC-23
production during periods in which they were ineligible for
CERs and upped it when they became eligible again, gaming the
system. "They found the smoking gun," says Michael Wara, a
professor at Stanford Law School.
Since the executive board received that submission in July,
eight HFC projects have been placed under review. The CDM's
methodology panel is looking again at the way that HFC-23
schemes are assessed. According to Point Carbon, a
market-intelligence firm, three countries on the board, which
numbers ten in all, are putting applications for increased
production from HFC-23 makers out to review as a way of
stopping new issuance until the methodology is revised. The
supply of CERs is likely to dry up over the rest of the year.
Longer-term demand for HFC-23 CERs may fall, too. Connie
Hedegaard, the EU's climate commissioner, is calling for the
role industrial-gas CERs are allowed to play as offsets to be
reassessed for the trading scheme's next phase, which will
run from 2013 to 2020. A Deutsche Bank analysis suggests that
by reducing supply, a tough stance on this issue could drive
the spot price of a tonne of carbon up from today's €15 to
€25 by the end of the year.
A more spectacular risk, Point Carbon's Kjetil Roine
points out, lies in rules to be discussed at the next meeting
of the CDM's executive board in mid-September. These could
make the entities responsible for CER issuance liable for
replacing CERs issued incorrectly in the past. If some HFC-23
CERs were deemed retroactively invalid, such sanctions would
drive up the price of other CERs while putting some of these
entities in serious financial trouble.
There is some good news. Until recently it appeared that,
despite the large amounts of money changing hands, HFC-23
emissions had been steadily increasing. A study by Ben Miller
of America's National Oceanic and Atmospheric Administration
and colleagues published recently found that in fact emissions
fell by 40% or so between 2006 and 2009. But at a very high
price.
-0- Sep/02/2010 21:01 GMT
