CDM toothing problems

A critical look by the New York Times at the Clean Development Mechanism (CDM) reveals "some hidden problems." To be sure, from an American perspective CDM is still "an obscure United Nations-backed program" (sic) and not an integral part of the Kyoto Protocol. But the article's findings are interesting, especially concerning some of the unintended side-effects.

Outsize profits
The article cites the case of a chemical factory in Quzhou, China, where actual clean-up costs are $5 million but under CDM foreign companies are paying around $500 million. These companies, from Europe and Japan, pay a large premium because the gas involved (HFC-23) is far more detrimental to global warming than CO2. Profits are shared by the factory owners, a Chinese government energy fund, and Western consultants and bankers.

A UN study calculated that CDM credits for these types of incinerators could be as much as $800 million a year, while the cost of building and operating them will be only $31 million a year. This raises the question of whether it wouldn't be more effective, environmentally speaking, to just pay for the clean-up costs and put the rest to better use.

Kyoto vs. Montreal
Another problem is that factories like these produce a Freon-type refrigerant that will soon be banned under the Montreal Protocol, the 1987 agreement on ozone-depleting substances. But as profits from curbing emissions are now so high for these factories, they are in fact expanding and building new ones - causing a conflict of interest between Kyoto and Montreal. The issue was addressed at the Nairobi climate conference, with European delegates proposing to set up an international fund to help retool these factories, but the initiative was blocked by China.

China is by far the largest benificiary, collecting almost half of the projects' payments in the refrigerant industry. Originally, countries in sub-Saharan Africa were envisioned to profit, but now only four countries (China, India, Brazil and South Korea) collect 80%.

Pilot phase
Issues like these illustrate the hugely complex problem of how to limit soaring emissions from the largest developing countries. As an American emissions consultant commented, the CDM program may have flaws, but "it’s a pilot phase - this is a 100-year problem."

Read the entire NYT article, Outsize Profits, and Questions, in Effort to Cut Warming Gases (login required)
Or virtually the same artical in International Herald Tribune (no login)