The EU is expected to vote in early 2011 on whether to restrict United Nations-sponsored offsets linked to HFC-23 and some nitrous oxide credits in the EU carbon market system. The vote follows discussions that progressed within the European Commission’s climate panel to ban the industrial gas, Bloomberg reported.
HFC-23 is a waste-product of the hydrochlorofluorocarbon HCFC-22 (or R-22) refrigerant production cycle, and it is 14,800 times more potent than carbon dioxide, according to NewScientist.com.
The proposed ban would affect certified emissions reductions (CERs) credits from the UN Clean Development Mechanism, the world’s second-biggest market, and the Joint Implementation program. The CDM-supervised credits are awarded to investors in projects to cut greenhouse gases in developing nations, Bloomberg reported.
The value of the UN CERs are up to 100 times the cost of incinerating the gas, and could very well provide the incentive to overproduce during the industrial cycle and “maximize the output of HFC-23,” according to NewScientist. “The resulting income of Chinese companies alone is estimated to reach $1.6 billion by 2012.”
“While HFC-23 projects represent less than 1 percent of all registered CDM projects, their credits account for more than a half of almost 479 million offsets issued so far. The 19 projects cutting the gas under the CDM program are located mainly in China and India,” according to Bloomberg.
There has been growing concerns about integrity of the trades. European Commissioner for Climate Action, Connie Hedegaard said in a statement last month, which started motions toward the pending EU vote, that “the current incentive structures work against necessary reforms at the international level. In particular, the lucrative nature of HFC-23 projects appears to discourage countries hosting these projects to support cheaper and more direct action to cut these emissions.”
The ban in the EU could cause a rise in the price of CERs from 18 Euros to 25 Euros per metric ton by 2013, according to an earlier Bloomberg report.