UN panel registers CDM project that could generate 4 million CERs a year

(Pointcarbon, Oslo)UN panel registers CDM project that could generate 4 million CERs a year

The UN-appointed panel that administers the Kyoto protocol's clean development mechanism (CDM) has registered a large project in China that could generate over 4 million carbon credits a year.

The executive board of the CDM gave the thumbs-up to a project that destroys HFC 23, a highly potent greenhouse gas that is judged to be 11,700 times more powerful than carbon dioxide.
The project, which has been installed at a refrigerant plant owned by China Fluoro in Shandong province, is the seventh-largest project of its type to be registered by the CDM executive board.

Two carbon funds managed by UK-headquartered carbon bank Climate Change Capital are listed as buyers of carbon credits - known as certified emissions reductions - from the project.

One of the funds, Climate Change Capital Carbon Managed Account, was set up for the purpose of procuring carbon credits for the trading arm of UK utility Centrica.

The CDM board has registered a total 16 HFC 23 projects, nine in China, four in India and one each in Argentina, Mexico and South Korea, which have a combined potential to generate 65 million carbon credits a year.

HFC is a by-product of HCFC 22, a compound that is used in air-conditioning units.

Another 20 or so HFC 23 projects are at varying levels in the pre-registration stage, but most of these are 'prospects', meaning that there is no firm commitment that the project will be developed.

Some projects that are the prospect stage have been proposed for 'new' HCFC 22 production at plants that started production after 2004.

Current rules on the CDM prohibit new capacity at HCFC 22 plants from earning carbon credits, and the issue will once again be discussed at climate change talks in Indonesia at the end of the year, where a range of proposals will be discussed.

These include an outright ban on including HFC 23 from new HCFC 22 plants or a framework that would levy a high tax on carbon credits generated by newer refrigerant plants, proceeds of which would be channelled into a clean technology fund that would invest in renewable technologies.

Montreal

Meanwhile, on the 20th anniversary of the 1987 Montreal Protocol that controls production of refrigerant gases - otherwise known as clorofluorocarbons – signatories have gathered once again in the Canadian city.

Among the items being discussed is a possible early phase out for HCFC 22 in the developing world.

But even if the Montreal meeting was to agree on a much earlier phase-out for HCFC 22, any impact on the European carbon market would be subject to a decision by the EU on whether carbon credits derived from the destruction of HFC 23 will be allowed for compliance by installations in the EU post-2012.

The third phase of the cap-and-trade scheme gets underway in 2013, but the import of credits from HFC 23 projects is controversial as refrigerant plants in China and India have made massive returns for a relatively small investment.

HCFC 22 is itself a climate-changing gas, and environmental groups argue that the CDM provides a 'perverse incentive' for factories in the developing world to produce the compound instead of less polluting alternatives.

Carbon credits from HFC 23 projects have also enabled power plants and factories in the EU to buy very cheap offsets, which can be used to meet targets under the cap-and-trade scheme.

London