Russians accused of abusing carbon credits

RUSSIA: Carbon credits worth millions of euros are said to have been fraudulently claimed by Russian factories for destroying HFC23, a by-product of producing R22.

A report in Nature Climate Change accuses Russian chemical plants of increasing production of trifluoromethane (HFC23) and sulfur hexafluoride (SF6) – two highly potent greenhouse-gases – to “unprecedented levels” so that they could reap financial benefits from their disposal.

Developed nations are able to earn carbon credits by investing in emissions-reduction projects under a scheme called Joint Implementation (JI), agreed under the 1997 Kyoto Protocol. A similar loophole previously allowed China to claim huge amounts of money under the Kyoto Protocol’s Clean Development Mechanism (CDM).

The CDM allows a country, firm or individual to implement projects that reduce or remove emissions in developing countries and to earn certified emission reduction credits. JI allows a country, firm or individual to implement an emission reduction project and earn emission reduction units that can be sold. The main difference between the CDM and JI lies in their application, as JI projects can only be hosted by countries with emission reduction or limitation commitments.

Carbon credits are traded internationally on carbon markets such as the European Union’s Emissions Trading Scheme, and their monetary value is determined by how much buyers are willing to pay for them.

For HFC-23 and SF6, which is used in electrical components, the value of the credits obtained can exceed the cost of destroying these gases in the production process, creating a ‘perverse’ incentive to increase production so that credits can be claimed.

Report authors Lambert Schneider, an independent carbon-market specialist, and Anja Kollmuss from the Stockholm Environment Institute, found that generation of waste HFC-23 and SF6 gases increased dramatically between 2008, when crediting began, and 2013 at two Russian plants. They maintain that the increase in waste was not tied to a corresponding increase in the amount of useful product being made at these plants.

Schneider estimates that between 28 million and 33 million extra credits were issued to these Russian plants. In 2008, these credits were worth more than €20 each, however the value has now fallen to less than €1.

The report says that, although a supervisory committee exists to monitor and prevent abuses of the scheme, it is up to nations hosting JI projects to decide to request their assistance. According to Schneider, only 3% of JI credits awarded so far have come from projects that have received such oversight. “In my view, it is a loophole in the rules of the Kyoto Protocol,” says Schneider.