I commented on this issue recently on the DT blog in response to this article by Christopher Booker, but it’s a topic worthy of further attention. I’m sure most of you have heard of the Clean Development Mechanism (CDM), a tax-and-regulate plan set up as part of the 1997 Kyoto Protocol. Under it, firms in the developing world who can demonstrate they have reduced emissions are rewarded with carbon credits, which they can on-sell to western polluters, or use themselves to expand their operations.
Provided you buy into the need to limit greenhouse gas emissions in the first place, the CDM appears, prima facie, to be useful and fair. It shares the pain, and encourages industrial development in the poorest parts of the world. Unfortunately, it also assumes that owners of third-world industry are either a) stupid, or b) somehow more altruistic and noble (and less greedy) than their Western counterparts.
The problem centres around the production of certain chloroflurocarbons (CFCs), refrigerant gases widely proclaimed as having created the hole in the ozone layer. I’m not canvassing the science of this today, but the upshot of the Kyoto Protocol is that, while CFCs have been replaced by (more expensive) alternatives in Western industry, manufactures in developing nations can continue to use CFCs until 2030.
Now, a by-product of chlorodifluoromethane, or HFC-22 (one of the most common CFCs) is another gas called trifluoromethane CHF3, also known as HFC-23 and manufactured commercially by DuPont under the brandname Freon 23, a greenhouse gas calculated to be over 11,000 times more effective than CO2. As Booker reports,
By destroying the HCF-23, the firms can claim Certified Emission Reduction credits worth billions of dollars when sold to the West (while much of the useful HCF-22 is sold onto the international black market).
Last year, destruction of CFCs accounted for more than half the CDM credits issued, in a market that will eventually, it is estimated, be worth $17 billion. Of the 1,390 CDM projects so far approved, less than 1 per cent accounts for 36 per cent of the total value.
In other words, business creating its own demand—and it’s us who are paying for it. And while the UN recently announced it has “suspended” payments to five Chinese firms involved, it appears that it will boil down to a question of intent: were these firms creating HFC-23 just to destroy it, or was it a chemically unavoidable by-product of a legitimate business activity? Try proving that.
To me, this story is just one more example of how unworkable any emissions trading scheme will quickly become. To assume businesses will not identify angles of “sharp practice” and rort the system is naïve in the extreme. Again, this can only be policed by an ever-increasing bureaucracy—funded, as always, by the involuntary generosity of the taxpayer.