A loophole in an important part of the Kyoto Protocol has cost nearly $6 billion, suggests new research. The loophole will now be closed, say officials.
The problem relates to the Clean Development Mechanism (CDM). This scheme allows investors in countries that have Kyoto Protocol targets to buy carbon credits by investing in projects that reduce emissions in developing countries. The credits are essentially permits to pollute in their own countries.
The controversy centres around the inclusion of refrigerant-producing factories that generate the powerful greenhouse gas HFC 23 as a by-product. Many of these factories are in China, where investors can get CDM credits for destroying HFC 23, a relatively cheap process.
Critics of this practice say it is very wasteful to use the CDM to ensure destruction of HFC 23, when it would be far cheaper to simply give the factories the money to install the equipment to destroy the gas.
“HFC 23 emitters can earn almost twice as much from the CDM credits as they can from selling refrigerant gases – by any measure a major distortion of the market,” writes Michael Wara of Stanford University, US, in the journal Nature.
Wara says it would cost only $100 million to pay producers to capture and destroy HFC 23 compared with $6 billion in CDM credits. He said almost 30% of projects in the CDM pipeline were for destroying HFC 23. The “obvious solution”, he said, was to limit the CDM to carbon dioxide, rather than the six greenhouse gases covered by the UN’s Kyoto Protocol.
“No perverse incentives”
Senior officials at the United Nations Framework Convention on Climate Change (UNFCCC) say there will be no “perverse incentives” to build new refrigerant plants simply to get credits linked to HFC 23s.
Halldor Thorgeirsson, the director of sustainable development mechanisms at the UNFCCC claims: “The idea of easy money is out of proportion.” And he says the loophole is now closed and that new HFC 23 facilities will no longer be eligible for CDM credits.
“There are potential solutions on the table,” he says. One of these solutions is for public or private groups to pay to destroy HFC 23 and get incentives to cover the cost. Or carbon credits could be issued to governments, such as China’s, to destroy HFC 23.
Einar Telnes, at Det Norske Veritas, the leading certification group for verifying cuts in emissions, says it was right to include HFC 23 because of a lack of regulation in its emission. Without the CDM these gases would still be vented into the atmosphere, he says.
Dumps and dams
The CDM is worth $3 billion per year and is growing despite complaints. The UNFCCC says the project, funnelling billions of dollars into energy schemes such as wind or solar power, may avert a total of 1.8 billion tonnes in greenhouse gas emissions by 2012. That is more than Japan’s annual total, for example.
So far the CDM board has approved 493 projects ranging from trapping methane from a dump in Bolivia to a geothermal scheme in Indonesia. It has rejected 11 schemes, including expansion of a hydro-electric dam in India and a project to improve sugar milling in Mexico.
Governments that have signed Kyoto have until 2008 to decide whether the CDM should include technologies that capture carbon emissions, for instance from a coal-fired power plant, and then bury them below ground. That could lead to a major expansion of the CDM.
Journal reference: Nature (vol 445, p 595)
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