Carbon Credit Watch

Once again, UN pays polluters with carbon credits

(December 17, 2010) The U.N. backtracks on its promise to suspend approval of carbon credits for contentious projects, writes Brady Yauch.

U.N. officials have repeatedly told critics of its carbon credit scheme that they are doing everything possible to ensure the program will not be exploited by polluters and, to show it meant business, suspended approval of carbon credits to contentious projects. Now that get-tough strategy seems to have changed. Officials in charge of overseeing the carbon credit scheme—the Clean Development Mechanism (CDM)—are once again giving the green light to millions of dollars in carbon credits for projects that critics say manipulate the program and increase pollution.

A recent report from Bloomberg says the U.N. recently handed out 16.6 million credits—known in official parlance as certified emissions reductions (CERs)—to projects that destroy HFC-23, a potent greenhouse gas. And earlier in the month, the agency approved millions more in credits for other HFC-23 projects. In the month of November, the U.N. approved more than 19-million carbon credits for these controversial projects.

The approvals follow an announcement in September by the CDM that the issue of CERs to HFC-23 projects would be halted until an inquiry into claims that these projects were gaming the program had been completed.

Critics contend that companies manufacturing the refrigerant gas HCFC-22 and its unwanted chemical byproduct, HFC-23, are producing excess pollution for the sole purpose of destroying it—receiving millions of dollars in carbon credits in the process. Critics say producers actually earn more from ‘abating’ HFC-23 than from producing the primary product, HCFC-22.

“Sometimes they produce gas just to burn it and get some CDM money, and it’s not at all an honest way of behaving,” said Chaim Nissim, an engineer with the Geneva-based NGO Noe21.

“It’s fake,” Nissim said. “It’s fake,” he said.

Eva Filzmoser, head of the Bonn, Germany-based group CDM Watch, describes the practice as “a real attack against the CDM.”

“There’s a lot of money that’s in there, and of course who wants to forget about it if you can have it?”

In response to a decision early in November to approve carbon credits for an HCFC-22 project, U.N. officials remained unapologetic and refused to provide any answers for the sudden change of mood.

“I cannot speculate on past or future issuance cases and what is, in the end, a matter of responsibility for board members,” was all David Abbass, the CDM’s public information officer, told Reuters.

“The fact that the issuance took place indicates that the total (of) three requests for review that would have triggered a request for review were not received from board members,” he added.

Rules governing the carbon credit market require a review if at least three of the 10 members on the Executive Board overseeing the market, register doubts over a project.

In total, according to Probe International’s carbon credit database, more than 240 million carbon credits have been issued to HCFC-22 producers—amounting to more than $3.7-billion dollars at current prices. CDM Watch claims that more than half of these credits could have been given as a result of the perverse incentive to create and destroy HFC-23 for greater profit.

While the situation regarding the HFC-23 loophole is disconcerting, the real concern is the carbon market itself, which—in the five years that it has been in existence—has attracted everything from corruption to fraud to claims that it helps to increase pollution. A carbon credit has no value in and of itself, rather its true value is determined by politicians and bureaucrats—making it a prime target for corruption and fraud.

Brady Yauch, Probe International, December 17, 2010

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