UN CDM Acts to Halt Flow of Millions of Suspect HFC-23 Carbon Credits

Aug 20, 2010, 11:34 ET from Environmental Investigation Agency

LONDON and WASHINGTON, Aug. 20 /PRNewswire-USNewswire/ -- In a series of unprecedented moves, the Executive Board of the UN Clean Development Mechanism (CDM) is halting issuance of carbon credits from the destruction of HFC-23 pending a comprehensive investigation to ensure the projects do not result in fake emissions offsets.  Certified Emissions Reduction Units (CERs) for HFC-23 destruction account for 51% of the almost 430 million CDM credits issued to date and have been extensively used in the carbon markets of the EU, Japan and other Kyoto Protocol Parties.  

The CDM actions have come in response to evidence that manufacturers of HFC-23 are gaming the system for profit by intentionally producing HFC-23, an unwanted byproduct gas, at higher rates and quantities than necessary.  With the integrity of the entire CDM at stake, the CDM Executive Board initiated an investigation to identify overproduction of credits that could lead to a revision of the methodology to prevent further abuse.  Earlier this week the Board blocked issuance of HFC-23 CERs from four facilities in China, and took similar action against a 5th Chinese plant today.

"The evidence is overwhelming that manufacturers are creating excess HFC-23 simply to destroy it and earn carbon credits," said Mark Roberts of the Environmental Investigation Agency.  "This is the biggest environmental scandal in history and makes an absolute mockery of international efforts to combat climate change."

HFC-23 is a 'super' greenhouse gas, thousands of times more powerful than CO2, and an unwanted byproduct of manufacturing the refrigerant gas HCFC-22.  The CDM's HFC-23 projects pay an estimated 65-75 times more for the destruction of HFC-23 than it actually costs, making HFC-23 destruction more profitable than HCFC-22 production.  Annual reports of one Indian producer show that for the 2009 financial year, a staggering 66% of its entire fluorochemical revenue was generated by the sale of HFC-23 CERs.

The CDM Executive Board is requesting 10 years of detailed data on HCFC-22 supply, demand, production and sales from the projects along with justification of any variations in the percentage of waste HFC-23 produced.  The UN is not only assessing the methodology, but whether manufacturers have manipulated the system for the seven years that HFC-23 destruction credits have been an approved CDM offset mechanism.

"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 EIA Senior Campaigner Clare Perry. "The CDM must eliminate the perverse financial incentives that encourage and reward HFC-23 production".

Report on HFC-23 in the context of the EU Emissions Trading Scheme:  http://www.eia-international.org/cgi/reports/reports.cgi?t=template&a=199

Details of the Executive Board's decision can be found at: http://cdm.unfccc.int/Projects/ReviewCases_EB55RevProcedure.pdf

Additional info and reports on HFCs and the CDM available at:  www.eia-international.org or www.eia-global.org

SOURCE Environmental Investigation Agency