UN halts carbon credit scheme over fears of abuse

Some companies are believed to be abusing the emissions trading scheme by overproducing dangerous greenhouse gases just to generate carbon credit revenues.

Under the UN Clean Development Mechanism (CDM) companies earn carbon credits for the destruction of trifluoromethane (or HFC-23). HFC-23 projects account for more than half of all CDM carbon credits sold to date.

But in a series of unprecedented moves the UN halted issuing new carbon credits for the destruction of HFC-23, pending an investigation to ensure the project does not result in fake emissions offsets.

The actions come in response to evidence that manufacturers are “gaming the system” for profit by intentionally over producing HFC-23 at higher rates and quantities than necessary, according to the Environmental Investigation Agency (EIA).

The CDM leadership blocked issuance of HFC-23 emission reduction units from five facilities in China.

“The evidence is overwhelming that manufacturers are creating excess HFC-23 simply to destroy it and earn carbon credits,” said Mark Roberts of the EIA. “This is the biggest environmental scandal in history and makes an absolute mockery of international efforts to combat climate change.”

HFC-23 is a “super greenhouse gas”, thousands of times more powerful than CO2, and an unwanted byproduct of manufacturing the refrigerant gas HCFC-22.

The CDM project pays about 70 times more for the destruction of HFC-23 than it actually costs, making HFC-23 destruction more profitable than HCFC-22 production.

Annual reports of one Indian producer show that for the 2009 financial year, a staggering 66% of its entire fluorochemical revenue was generated by the sale of HFC-23 destruction credits.

“The CDM has made destruction of HFC-23 so valuable that, at least for some manufacturers, it has become the product, not the by-product,” said EIA Senior Campaigner Clare Perry. “The CDM must eliminate the perverse financial incentives that encourage and reward HFC-23 production".