HFC special: Eyes on the 55th CDM Executive Board tion about how incredible profits made by HFC-23...

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Transcript of HFC special: Eyes on the 55th CDM Executive Board tion about how incredible profits made by HFC-23...

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    HFC special: Eyes on the 55th meeting of the CDM Executive Board

    The CDM Executive Board will hold its 55th meeting from 26–30 July 2010 in Bonn. As usual, CDM Watch takes the opportunity to read between the lines of the annotated draft agenda (PDF) to bring some transparency to the decisions of the Executive Board. The annotations to the draft agenda are published ahead of every Board meeting and are supposed to give a clearer overview about the Board’s agenda. However, due to the complexity of the issues, they are kept in a highly technical language and don’t seem to aim at revealing what’s really at stake. As a response, CDM Watch adds some meaning to the language by exposing critical items and providing recommendations.

    Above all, this upcoming meeting will be marked by discussions on a request to revise the crediting methodology for HFC-23 projects submitted by CDM Watch earlier this year. The request highlights that the current rules would create perverse incentives for plant operators to artificially increase HCFC-22 production, from which HFC-23 is an unwanted byproduct. In light of the significance of these findings and the potenti- al for considerable over-estimation of emission reductions, CDM Watch believes that the methodology must be put on hold with immediate effect.

    Within the context of this revision request, the Board will also address the first request to renew the crediting period of a HFC-23 destruction project. The HFC-23 Decomposition Project in Ulsan, South Korea, operated by the Ineos Group has generated 1,4 Mio credits over the first crediting period and is planning to cash in on another 2,2 Mio credits from 2010 to 2017. CDM Watch calls on the Board to freeze any decision on this project and to request the Meth Panel to urgently conduct the required investigation and to swiftly prepare a revised methodology which addresses the issues with no further delay.

    CDM Watch also recognizes that in cases where substantial economic interest is at stake, such as in the upcoming discussions on the HFC-23 revision request, Board members face particular pressure under current CDM rules. Therefore, CDM Watch recommends that all Board members publish “documents related to conflicts of interest” ahead of this next meeting and strongly recommends a number of Board members and alternates to leave the room when the HFC-23 revision request will be on the agenda.

    In order to put these discussions into context, this newsletter also includes informa- tion about how incredible profits made by HFC-23 projects result in overproduction of cheap HCFC-22, and undermine global efforts under the Montreal Protocol to phase out HCFCs and move industry toward more environmentally friendly refrigerants.

    Board members will also make a landmark decision on whether to reject the 4000- MW super-critical coal plant owned by Costal Gujarat Power that claims to reduce 2,6

    Newsletter #4 / July 2010

    http://cdm.unfccc.int/EB/055/eb55anno.pdf

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    Mio tonnes of emissions for the next 10 years by replacing domestic with imported coal.

    Another project currently under review is the Metro Clark Landfill Gas Capture pro- ject. A guest comment by “Focus on the Global South” explains that this project is not additional because gas control and recovery system are essentially necessary for it to legally operate in the Philippines and are therefore baseline. Following is a brief comment on including yet another contaminated substance into AM0025 that allows waste incineration and explains why burning sludge as a fuel is a bad idea.

    Within the context of the recent DOE rating by WWF, CDM Watch makes several com- ments related to the disrespect that TÜV SÜD brings to civil society and recommends rejecting the Plantar project 2569 in order to set a signal that civil society participati- on in the CDM must be taken seriously. Moreover, it suggests that documents related to spot checks that lead to a suspension be publicly accessible.

    Happy reading!

    Table of contents

    1. Perverse incentives of HFC-23 projects

    2. Renewal of Ineos HFC-23 destruction project

    3. Who has a conflict of interest in the HFC-23 case?

    4. Digression: Clash of the Conventions

    5. The folly of CDM subsidies to replace domestic with imported coal

    6. Guest comment: CDM landfill project under review undermines Philippine solid waste law

    7. Revising AM0025: Burning sludge as a fuel is a bad idea

    8. TÜV SÜD in the spotlight despite suspension

    9. Key safeguards in the CDM appeals procedure

    1. Perverse incentives of HFC-23 projects

    HFC-23 projects in the CDM have become the focus of media attention over their lack of environmental integrity in the past weeks1. During this upcoming meeting, the Board will finally discuss new evidence showing that the current CDM methodology

    1 NYTimes, CDM Critics Demand Investigation of Suspect Offsets, 14 June The Guardian, UN considers review of alleged carbon offset abuses, 16 June Bloomberg, UN May Complete Review of Hydro-Fluorocarbon Emission Credits by August, 22 June Le Monde, Climat: les effets pervers des crédits carbone, 26 June Reuters, Kyoto may push factories to pollute more-UN report, 2 July Fox News, UN report fuels charges of manipulation in $2.7 billion carbon-cutting market, 2 July Financial Times NL, VN onderzoekt verdachte CO2-handel, 3 July

    http://www.guardian.co.uk/environment/2010/jun/16/un-review-carbon-offset-abuses http://www.guardian.co.uk/environment/2010/jun/16/un-review-carbon-offset-abuses http://www.bloomberg.com/news/2010-06-22/un-may-complete-review-of-awarding-hydro-fluorocarbon-credits-by-august.html http://www.reuters.com/article/idUSLDE6601S220100702 http://www.foxnews.com/world/2010/07/02/report-fuels-charges-manipulation-billion-carbon-cutting-market/

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    creates perverse incentives for plant operators to artificially increase HCFC-22 pro- duction, from which HFC-23 is an unwanted byproduct.

    This evidence was first presented to the Board in a letter by Noe21 in December 2007. Due to the lack of action by the CDM Executive Board to address these flaws, CDM Watch has now submitted a formal proposal to revise the crediting methodology in line with UN procedures. The suggested revision removes the strong economic incentives to increase HCFC-22 production and HFC-23 generation by introducing an emission benchmark more in line with the actual costs of HFC-23 destruction. The new benchmark would cut the inordinately high and excessive number of credits currently issued for the destruction of HFC-23 by more than 90%. The plant operators would still have sufficient economic incentives to destroy HFC-23 but the revenues from selling credits would not exceed the HCFC-22 production costs as is currently the case.

    The Methodologies Panel discussed this revision request for the first time in end June 2010. Although not providing a clear recommendation to the Board it did prepare a note (PDF) on the issue, agreeing that many of the claims in the revision request could cause perverse incentives, i.e. that plants are producing dramatically more HFC-23 per tonne of HCFC-22 than technically feasible, that some factories are only producing HCFC-22 if they are receiving CDM credits, and that the existence of the CDM credits may be causing an increased production of HCFC-22. The Panel said that further investigation is required to “identify situations” resulting in excessive issuan- ce of carbon credits and how “to improve the methodology”. Based on the note that was developed at that occasion, the Board is expected to provide further guidance on possible action with respect to the methodology during this upcoming Board meeting.

    Action to be taken by the Board: In light of the significance of these findings and the potential for considerable over-estimation of emission reductions, CDM Watch believes that the methodology AM0001 must be put on hold with immediate effect. The Board should request the Meth Panel to urgently conduct the required investiga- tion and to swiftly prepare a revised methodology which addresses the issues with no further delay. In this context, CDM Watch reminds that the Board put four methodo- logies on hold in the past (ACM0005, AM0001, AM0006 and AM0016) in situations where the environmental integrity of the CDM was at risk and where a revision of the methodology required more time.

    In addition, all issuance of CERs shall be ceased until a fully corrected, revised me- thodology is adopted. The continued validity of this version of the methodology and the continued issuance of CERs before the investigation is completed would seriously undermine the credibility of the whole CDM and violate the overarching principle established in the Kyoto Protocol that emission reductions from CDM projects shall be real, measurable and additional.

    For more information about the revision request, including press releases and back- ground papers see http://www.cdm-watch.org/?cat=4

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    https://cdm.unfccc.int/methodologies/PAmethodologies/revisions/58215 http://cdm.unfccc.int/Panels/meth/meeting/10/044/mp44_an02.pdf

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    2. Renewal of Ineos HFC-23 destruction project

    Within the context of the HFC-23 methodology revision request, it is important to note that the Board will also address the first request to renew the crediting period by a H