(August 15, 2012) The UN’s carbon trading scheme to reduce global concentrations of greenhouse gases has provided a handful of factories in developing nations with a perverse incentive to massively increase them.

A New York Times article continues an ongoing story we have written about for some time now. This latest update—on how the UN’s carbon trading scheme to reduce global concentrations of greenhouse gases has provided a handful of factories, primarily in India and China, with perverse incentives to massively increase them—again highlights the way in which the UN’s subsidies intended to improve the environment instead created their own damage. The Natural Resources Defense Council’s OnEarth blamed “markets” for the perverse results described in the New York Times article. “When you create a market-based solution for dealing with greenhouse-gas emissions, don’t be shocked when you end up creating an actual market—and all of that ‘rational’ economic marketplace behavior that goes along with it,” they said. But greenhouse gas markets are not real markets, nor do the commodities traded have inherent value to the buyers and sellers. Rather, they are faux markets in which participants merely respond to the supply, demand and terms of trade established by government decree.  Guarantee a revenue stream for any commodity (or for destroying it in the case of HFC-23) and be sure that irrational quantities will be produced. NRDC should not blame “markets,” but politicians for establishing  phony markets devoid of “rational” economic behaviour.

Profits on Carbon Credits Drive Output of a Harmful Gas

By Elisabeth Rosenthal and Andrew W. Lehren for the New York Times, August 8, 2012

A view of a coolant-producing factory in Jiangsu Province, China. Some manufacturers of gases used in air-conditioning and refrigeration have earned millions by accumulating emissions credits from the destruction of an obscure waste gas normally released as a byproduct. The credits are then resold on international markets. Credit: Qilai Shen for The New York Times.

RANJIT NAGAR, India — When the United Nations wanted to help slow climate change, it established what seemed a sensible system.

Greenhouse gases were rated based on their power to warm the atmosphere. The more dangerous the gas, the more that manufacturers in developing nations would be compensated as they reduced their emissions.

But where the United Nations envisioned environmental reform, some manufacturers of gases used in air-conditioning and refrigeration saw a lucrative business opportunity.

They quickly figured out that they could earn one carbon credit by eliminating one ton of carbon dioxide, but could earn more than 11,000 credits by simply destroying a ton of an obscure waste gas normally released in the manufacturing of a widely used coolant gas. That is because that byproduct has a huge global warming effect. The credits could be sold on international markets, earning tens of millions of dollars a year.

Read the original New York Times article here.

Further Reading:

• Once again, UN pays polluters with carbon credits
• Carbon Credit fraud discovered in Ukraine
• A Carbon Trading System Draws Environmental Skeptics
• Cement companies in line for €226m windfall after sale of surplus carbon credits
• Murder on the Carbon Express: Interpol Takes On Emissions Fraud
• Conflicts of interest threaten carbon-trading mechanism
• ArcelorMittal Corus Salzgitter US Steel and SSAB top firms in EU profiting most from carbon credit
• Who to blame? UN wants to make auditors of carbon credit projects liable for their work
• Oil palm plantations on peatlands won’t get carbon credits under CDM
• Subsidizing monoculture plantations: Indonesia officials want palm oil farms to receive carbon credits
• Devil is in the (lack of) details: citizens left in the dark on carbon credit schemes
• Paying the polluters: The carbon credit way
• Carbon credit fraud makes its way to Liberia
• Scamming the carbon markets in ten easy steps
• It’s official: global warming solutions will destroy the environment
• Emissions trading: Commission welcomes vote to ban certain industrial gas credits
• CDM Methodologies Panel
• CD4CDM (Capacity Development for the Clean Development Mechanism, UNEP-RISO Centre)
• China’s greenhouse gas vent threat in bid to extort billions