Straight to store

Newsletter

Enter your email below to subscribe to our newsletter.

Doubt over integrity of half of offset credits ever produced

Assaults on the integrity of the Clean Development Mechanism (CDM), the UN-approved standard for carbon offsetting and the source of credits for both national governments and privately owned companies, are not rare. In the past two years alone VAT fraud, suspended auditors, governments reuse of credits and huge inefficiencies have led many to question whether the mechanism is delivering.

Negotiators and campaigners at the Cancun climate summit were focussed on the latest scandal – the production of offset credits from projects that destroy HFC gases.

Environmentalists say that the CDM creates a perverse incentive to increase rather than decrease emissions. They claim that companies are over-producing the potent greenhouse gas HFC-23, purely so they can be paid to stop doing it. 

HFC-23 is a by-product of air-conditioning and refrigeration systems. Crucially, it is 11,700 times more powerful than CO2, meaning that just one project to reduce HFC-23 can produce millions of tradable carbon credits.

Of approximately 2000 registered CDM projects, there are only 19 HFC-23 projects. But this small number of projects counts for just over half of the 475 million credits issued to date. Further, it is estimated that buyers inadvertently pay 65 to 75 times more to destroy HFC-23 than it actually costs.

A host of evidence adds weight to claims that some plants are operated in such a way as to maximise the production of offset credits. The NGO coalition CDM Watch reviewed data from the Ulsan project in South Korea, revealing an artificial increase in HFC-23 production during the period of project registration under the CDM.

Also implicated in these accusations are two HFC-23 projects in China, in which the World Bank has invested around $1 billion through its Umbrella Carbon Facility. The World Bank however denies claims that these lucrative projects are attempting to game the system and attributes the increase in HFCs to a growing demand for refrigerators and air-conditioners.

As a result of claims like these, the approval of HFC-23 projects was suspended between August and November, while the CDM Executive Board looked into the allegations. The investigation uncovered some serious flaws in the HFC-23 methodology which will now be revised.

But the Board did not find any project developers guilty of misconduct, meaning these projects can once again start generating offset credits. During the Cancun summit 19 million credits were issued from HFC-23 projects. 

This sparked fury from NGOs. Natasha Hurley, Policy Advisor at CDM Watch, said “This move is totally incoherent. It doesn’t make sense for the Board to suspend issuance of credits while the investigation is ongoing and then lift the suspension the very moment it finds that there is a problem”.

The EU is also unlikely to be over the moon. Artur Runge-Metzger, a senior negotiator with the European Commission, stated early on in the talks that the generation of offsets from HFC-23 projects “is something that we have to address”.

Instead the EU would like large developing nations themselves to pay for the cost of destroying HFC-23. They are prepared to take matters into their own hands  to achieve this.

On 25 November 2010 the European Commission proposed to ban carbon credits generated from HFC-23 for use in the EU emissions trading scheme from 1 January 2013. A vote to determine whether this proposal will be put into legislation will take place on 21 January 2011.

OUR AWARDS

      Our latest awards

       

What people say

  • "This might just be the world's first truly ethical offseting scheme."

    John Grant, Author of The Green Marketing Manifesto
  • "I have never been a fan of carbon offsetting but Carbon Retirement is different"

    Richard Ellis, Group Head of CSR Alliance Boots
  • "I have long thought European Allowances were the best alternative to offsets"

    Joseph Romm, Former environment advisor to Bill Clinton
  • "Carbon Retirement is an innovative idea that has clear differentiation in the market"

    Jo Hill, Unltd.
  • “We benefit from Carbon Retirement's innovative and responsible approach to carbon offsetting.”

    Adam Black, Head of Sustainability Doughty Hanson

Carbon neutral certified company