Since 2005 19 HCFC-22 production plants, mostly in China and India, have profited from manufacturing the environmentally harmful coolant HCFC-22. The companies are paid to destroy its waste by-product HFC-23 under the United Nations Clean Development Mechanism (CDM), which awards certified emission reduction (CER) credits to emission reduction projects in developing countries, generating a revenue stream more lucrative than HCFC-22 sales. This has driven plants in the developing world to not only increase the production but also to keep it high.
HCFC-22 plants earn $20 million to $40 million a year from HFC-23 destruction
Since 2005, 46% of all CDM carbon credits have been awarded to the 19 coolant factories, in Argentina, China, India, Mexico and South Korea, with two Russian plants receiving carbon credits for destroying HFC-23 under a related United Nations program.
Destroying the waste gas is cheap and simple, and companies can earn more than 11,000 credits by simply destroying a ton of HFC-23 waste gas because of HFC-23’s high global warming potential (GWP), calculated to be 11,700 CO2eq. These credits, sold on international markets, earn HCFC-22 manufacturers tens of millions of dollars a year. Carbon market consulting firm IDEAcarbon estimates that each plant has earned, on average, $20 million to $40 million a year from simply destroying waste gas.
According to United Nations reports the production of HCFC-22 was so driven by carbon credits for HFC-23 destruction that in the first few years more than half of the plants operated only until they had produced the maximum amount of gas eligible for the carbon credit subsidy, then shut down until the next year.
UN CER credits cut by two-thirds and EU to disallow HFC-23 credits in ETS
The United Nations has recognised the temptation for companies to take advantage of the incentives to produce environmentally harmful refrigerant gases, refusing since 2007 to award carbon credits to any new factories destroying HFC-23. Moreover, last November, it announced that in contract renewals, factories could claim credits for waste gas equivalent only to 1% of their coolant production, down from 3%.
The European Commission has also banned to use emission offset credits from HFC-23 gas destruction projects in the EU Emissions Trading System (EU ETS) . The ban means that companies will be able to use these credits for 2012 compliance under the EU ETS until 30 April 2013, but not thereafter.
However, even with these adjustments, credits for destroying HFC-23 this year remain the most common type in the United Nations CDM system, and the question remains as to whether without a form of inducement coolant factories will continue to destroy HFC-23.