Kyoto may push factories to pollute more-UN report

* U.N. panel reviewed Kyoto carbon offset projects

* Says Kyoto incentives encouraged inefficiency

* U.N. Executive Board to review at July meeting

By Michael Szabo

LONDON, July 2 (BestGrowthStock) – A Kyoto Protocol scheme may be
encouraging projects to emit more greenhouse gases because of
incentives to earn carbon offsets from subsequently destroying
these, a U.N. report said.
The projects under investigation are the most lucrative
under Kyoto’s Clean Development Mechanism (CDM) and account for
more than half carbon offsets sold under the scheme. Limiting
their output could impact carbon prices.

The $2.7 billion scheme allows companies and countries in
the industrialised world to meet carbon caps by funding
emissions cuts in developing nations, earning offsets called
certified emissions reductions (CERs).

“There is a strong incentive to … not improve the
efficiency of the plant … during any refurbishment because of
the CDM benefits,” said the report published late on Thursday.

“Further investigation is required … to identify situations
in which overestimation of CERs occurs and improve the
methodology accordingly,” it added.

The U.N. methodology panel advises the scheme’s supervisory
executive board on what types of carbon-cutting projects qualify
for offsets.

It asked the board for “guidance on possible action” at its
next meeting from July 26-30. Three out of 10 board members can
form a blocking minority, making decisive action unlikely, said
one carbon market expert on condition of anonymity.

The investigation was sparked when a green group earlier
this year made a submission to the board saying said that the
most profitable CDM projects, which destroy a potent greenhouse
gas called hydrofluorocarbon-23 (HFC-23), were emitting more
HFCs than necessary in order to destroy these and sell more
CERs. [ID:nLDE659169]

HFC gases are a waste product from the manufacture of
refrigerants, and trap around 12,000 times more heat than the
more common, climate-warming carbon dioxide. Most HFC projects
are registered in China and India.

In its submission to the executive board, green group
CDM-Watch said plants “intentionally operated in a manner to
maximise the production of CERs”, and produced less HFC-23
during periods when they were unable to request CERs.

Thursday’s report said that the efficiency of refrigerant
plants was improving, and that “it is probable” that new
factories unable to claim carbon offsets were producing fewer
waste greenhouse gases than those registered under the CDM.

Among “possible actions”, the report proposed: “A
reconsideration of a cap … at a level representing the best
available technology,” which could be half the present cap on
the production of HFC-23.

Benchmark CER futures (CEREZc1: ) were trading at around 13
euros ($15.91) a tonne on Friday.
(Reporting by Michael Szabo; Editing by Gerard Wynn)

Kyoto may push factories to pollute more-UN report