The cost of making HCFC-22, which is used in refrigerators and air conditioners, is, oddly, less than the value of carbon credits you can be given by destroying HFC-23, a by-product from making it, writes Gangadhar S Patil in the Indian news service “Daily News and Analysis”.
This is because HFC-23, a by product of making HCFC-22, is 11,700 more powerful a greenhouse gas than carbon dioxide.
Mr Patil calculates that over 50 per cent of all carbon credits issued before July 2012 were for destroying HFC-23.
So companies are incentivised to make HCFC-22 just so they can have HFC-23 and destroy it.
There has also recently been a sharp fall in the price of HCFC-22, he writes.
One company Gujarat Fluoro Chemicals, increased production of HCFC-22 by 45 per cent after getting clean development mechanism (CDM) approval in 2004, Mr Patil writes, after researching the company’s annual report.
Meanwhile, between 2005 and 2012 it earned 1,000 crore (x 10m) Rupees, or GBP 110m, from selling carbon credits.
At the same time, the company’s inventory of HCFC-22 increased from 349 units in 2005 to 3599 units in 2010, suggesting that it is manufacturing large amounts of HCFC-22 but keeping it in storage. It is not known what its long term plans for this are.
In 2011 the CDM executive board considered stopping issuing carbon credits for destruction of HFC-23 gas.
Michael Ware of Stanford University is quoted as saying that most credits generated in the CDM come from projects which are suspected of over-crediting and are creations of bogus accounting.
Amar Mody, a carbon market specialist in Mumbai, is quoted as saying that he estimates that almost 40 per cent of total greenhouse gas reductions have a false baseline figure.