Carbon trading lures firms to make greenhouse gas

A handful of Chinese and Indian chemicals companies seemingly have the world over a barrel – or rather a large number of barrels of a super-greenhouse gas called HFC-23, which is 14,800 times more potent than carbon dioxide.

This week, apparently following Chinese threats to vent stockpiles of HFC-23 into the atmosphere, a UN panel issued two million valuable carbon credits to a company called Juhua. It has a factory in Hangzhou, Zhejiang province, where the gas can be destroyed.

Nobody needs HFC-23. It is a waste by-product of the manufacture of a refrigerant called HCFC-22, used mostly in developing nations. To curb the release of HFC-23 into the atmosphere, the signatories to the Kyoto protocol agreed to pay carbon credits to refrigerant manufacturers that agree to capture and destroy it. The manufacturers can then sell the credits to western companies that want to offset their obligations to cut emissions of other greenhouse gases, under a Kyoto scheme known as the Clean Development Mechanism (CDM).

The offer only applies to HCFC-22 plants that were built before 2000. Even so it has proved highly lucrative. By some estimates, the value of the carbon credits is up to 100 times the cost of incinerating HFC-23. The resulting income of Chinese companies alone is estimated to reach $1.6 billion by 2012.

Not such a waste

As a result, the "waste gas" HFC-23 has become much more profitable to refrigerant factories than HCFC-22 itself. Watchdog groups like the London-based Environmental Investigation Agency (EIA) say the compensation system ends up providing a strong incentive to overproduce HCFC-22, using methods that maximise the output of HFC-23.

Fearful of a burgeoning scam, CDM officials recently began a review. The European Union wants all credits for HFC-22 outlawed. But last week CDM officials in China threatened that factories there would respond by releasing the gas into the atmosphere. This week's issue of new credits to Juhua suggests that the CDM has backed off before its review is completed.

Worldwide, there are 19 companies receiving carbon credits for the destruction of HFC-23. Most are in China and India. According to EIA's Clare Perry, the Chinese government imposes a 65 per cent tax on the revenue earned from selling such credits, which funds sustainable development projects. India does not levy such a tax.

Last week, at the climate conference in Cancun, Mexico, India successfully opposed the adoption of a provision that would have called for action to limit the production of HFC gases.

Source: "NewScientist"