UN halts carbon credits to Chinese HFC plants

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A UN body said last Friday (20 July) it would review a request from a Chinese plant destroying HFC-23 to generate carbon credits after having blocked four similar requests in a bid to ensure that the plants do not deliberately boost their greenhouse gas emissions.

The Chinese plants are requesting millions of Certified Emissions Reduction Units (CERs) for destroying HFC-23, a potent greenhouse gas that is a by-product of manufacturing the refrigerant gas HCFC-22. The credits are generated under the Clean Development Mechanism (CDM), which allows industrialised countries to offset a part of their emissions by funding reductions in developing countries.

HFC-23 projects have come under attack after environmental groups produced evidence that manufacturers are producing the greenhouse gas in higher quantities than they otherwise would to exert profits from the CDM.

The review decisions come after the CDM Executive Board in July started to investigate whether the projects currently registered have led to overproduction of HFC credits. The findings could eventually lead to a revision of the crediting methodology.

The board requested the Methodologies Panel, which has an advisory role, for data on HCFC-22 supply and demand to clarify whether CDM facilities are increasing their production and whether this could have led to increased production of greenhouse gas emissions due to the CDM.

But green NGO CDM Watch accused the board of "avoiding immediate and necessary action" due to internal conflicts of interest. It claimed that Chinese, Indian and Japanese board members were blocking any moves to review the methodology of crediting projects.

Japan's government has a stake in eight HFC-23 projects and companies such as Mitsubishi and Tokyo Electric are also involved in financing such projects. China, on the other hand, hosts the majority of the 19 registered HFC-23 projects. Its 11 projects generate around 65 million credits per year, earning about €650 million for the Chinese government's budget, CDM Watch said.

"The CDM has made destruction of HFC-23 so valuable that, at least for some manufacturers, it has become the product, not the by-product," said Clare Perry, senior campaigner at Environmental Investigation Agency (EIA). "The CDM must eliminate the perverse financial incentives that encourage and reward HFC-23 production," she added. 

Under the Kyoto Protocol, industrialised countries can meet part of their climate targets by investing in carbon reduction projects in developing countries.

The arrangement, called the Clean Development Mechanism (CDM), operates on the condition that projects generating credits have to ensure "additionality", or the principle that the reductions they achieve would not have occurred without the incentive of foreign finance.

The CDM has attracted criticism, however, as the additionality criterion has been abused. Credits granted for projects that should not have qualified in the first place have allowed developed countries to dodge their climate commitments, critics say.

In January 2009, the European Commission presented a proposal for a global agreement to replace the Kyoto Protocol (EURACTIV 26/01/09). The blueprint proposed an overhaul of the CDM to ensure that only projects delivering additional reductions and targeting more costly cuts receive credits.

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