August 23, 2010 / 12:21 PM / in 7 years

Divisive HFC carbon-cut plants gain W.Bank support

* World Bank supports HFC-23 projects, knocks gaming claims

* Says newer plants less efficient than older ones under CDM

* Warns against suspending CDM methodology before int‘l pact

By Michael Szabo

LONDON, Aug 23 (Reuters) - The World Bank has voiced support for chemical plants that destroy a potent greenhouse gas called HFC-23, which green groups have accused of increasing production to get extra carbon offsets worth millions of dollars. Approved under the Kyoto Protocol’s $2.7 billion Clean Development Mechanism (CDM) scheme, the 19 plants, mainly in China and India, receive offsets from the UN for incinerating a refrigerant waste gas called hydrofluorocarbon-23.

But environmental groups including Germany’s CDM Watch have accused the plants of intentionally boosting refrigerant gas production to destroy more HFC-23 and collect more offsets.

“The analysis conducted by CDM Watch is based on a narrow and simplistic approach...Key parameters have been discarded from the analysis, such as operating conditions and technical capacity,” the World Bank said in a report on its website.

“There is not sufficient evidence to support the allegations.”

CDM Watch was not immediately available for comment.

With a molecule of HFC-23 trapping 11,700 times more heat than a molecule of CO2, these projects have been lucrative for their long list of investors, which includes the World Bank.

The bank’s Umbrella Carbon fund has contracted to buy from two HFC-23 projects in China some 130 million tonnes in offsets through 2013, worth 1.76 billion euros ($2.24 billion) at current market rates.

But offset issuances to these two projects and three others were halted last week by the CDM’s executive board pending further investigation into the allegations. [ID:nLDE67J0T3]

The 19 HFC-23 projects account for over half of the 430 million offsets doled out to the 2,326 projects approved under the CDM to date.

OVERPRODUCTION?

CDM Watch accused the projects of overproducing a gas called HCFC-22, adding that the level of waste gas HFC-23 emissions per tonne of HCFC-22 was larger for plants covered by the CDM compared to newer facilities that were not.

“Scientific research reports that plants not covered by the CDM are less efficient in both developed and developing countries ... (and) this includes newer facilities in developing countries,” the World Bank said, adding that revenues from selling offsets do not exceed those from HCFC-22 production.

“If we look at China alone, where the majority of HFC-23 projects are located, the overall national production of HCFC-22 very significantly exceeds that of the CDM project unit.”

“Clearly the CDM is not driving the demand for production.” The World Bank cites rapid economic development as reason for the swift growth in HCFC-22 production in emerging nations, which it puts at 25 percent per year.

The report also notes the current lack of any international agreement or regulations to mandate the destruction of HFC-23.

“CDM revenues are the only financial resource available to developing countries to cover the incremental costs for the destruction of HFC-23 from HCFC-22 production in facilities.”

For this reason, the bank advised against suspending the CDM’s HFC-23 methodology, which would effectively curb the carbon finance available to these projects.

“Because of the significant impact of (these) projects on the global effort to reduce greenhouse gases, it is not advisable to put this methodology on hold before an international agreement is reached and a financial mechanism is available for developing countries to cover the additional costs for the destruction of HFC-23.” <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Take a Look on HFC-23 project probe [ID:nLDE67G1GZ]

Full report: link.reuters.com/saz56n ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Editing by Sue Thomas)

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