Adding a new dimension to the story of China’s for-profit participation in carbon credit trading, the Financial Times reports that Chinese factories and carbon traders are raking in tidy revenues by exploiting the high credit value of trifluoromethane (also called flouroform or HCF-23):
The equipment, known as “scrubbers”, to reduce HFC gases is cheap to install, at $10m-$30m (¬£5m-¬£15m) for a typical factory, according to industry estimates. Installing such equipment can generate millions of carbon credits, because HFC-23 is a greenhouse gas many times more potent than carbon dioxide.
Mark Woodall is chief executive of Climate Change Capital, which has a portfolio of about 50m certified emission reductions, or carbon credits,worth up to $750m, derived from Chinese HFC projects. He said: “They were deals that could be done relatively quickly and did not need a large amount of capital. These projects have a good track record of delivering the credits because of the low methodology and low technology risk.”
The practice is perfectly legal but effectively allows the factories and the companies through which they trade carbon credits to make big profits. The eventual buyers of the credits are governments in developed countries that have agreed to cut their greenhouse gas output under the Kyoto protocol.
This story follows a report earlier this month that China has become the largest source in the developing world for carbon credits purchased by Western firms. That news came amidst criticism the Chinese government was using selective taxes on carbon trading to push investment in projects beneficial to its own energy security.
Experts have seen HFC-based carbon trading in China as a potential threat to Kyoto for some time. See, for example, a 2004 report by Swiss policy consulting firm Infras (pdf), which argued “in the special case of HFC23, carbon trading does introduce a perverse incentive which does challenge the environmental integrity of [the Kyoto Protocol].”