A ban on climate credits leaves factories with little financial incentive to incinerate damaging gases, companies say.
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A ban on climate credits leaves factories with little financial incentive to incinerate damaging gases, companies say.

Story highlights

Under scheme, some Chinese factories receive credits for incinerating harmful gases

Companies say that ban on trading credits leaves them little incentive to incinerate gases

Releasing HFC-23 gases into the atmosphere is not illegal, despite threat to environment

Xi and Obama said last month they agreed to work to reduce hydrofluorocarbon levels

Financial Times —  

A “climate bomb” of potent greenhouse gases 15,000 times more damaging to the climate than carbon dioxide is set to be released by some of the world’s leading producers of refrigerants following a ban on climate credits.

The companies, the majority of them in China, argue that a ban on trading of climate credits for the incineration of HFC-23 makes it no longer financially viable to destroy the gas, which is a byproduct of a substance used in air conditioners and refrigerators.

A warning by the Environmental Investigation Agency in a report to be released on Monday will raise the pressure on China to ban such gases and end economic incentives for their production in multilateral talks.

Some 19 factories – 11 in China – making HCFC-22 have been receiving climate credits under the UN’s Clean Development Mechanism for installing and operating incinerators to burn HFC-23 that is created during the manufacturing process, instead of venting it into the atmosphere. Facilities in developing countries can sell emission reduction credits to buyers in developed countries to allow the latter to meet their targets under the Kyoto protocol.

However, the European Emissions Trading Scheme, the world’s largest carbon market, banned trading in those credits last month after finding that the financial incentive drove companies to produce more HFC-23 instead of curbing it. Other climate exchanges have said they will follow, causing substantial revenue streams for the producers to dry up.

The EIA said an investigation had shown that most of China’s non-CDM facilities were emitting HFC-23 already. “If all of these facilities [under the CDM] join China’s non-CDM and vent their HFC-23, they will set off a climate bomb emitting more than 2bn tonnes of CO2 equivalent emissions by 2020,” it said.

People involved in the sector in China said this was likely to happen. “If there is no more funding, the CDM plants could start venting as well,” Mei Shengfang, deputy secretary-general of the China Association of Fluorine and Silicone Industry, said. He added that authorities were considering offering support.

An executive at China Fluoro Technology, one of the largest Chinese CDM plants, said: “Our company is still incinerating the HFC-23 now. If the money is used up, we can stop incineration. We can’t go on doing this, we can’t afford it and we have no duty to do it.”

Releasing HFC-23 into the atmosphere is not illegal. China has been blocking proposals for a ban as part of multilateral talks under the Montreal Protocol to phase out hydrofluorocarbons, which continue on Monday in Bangkok.

China raised hopes this month when President Xi Jinping and President Barack Obama of the US said at a summit that they had agreed to work together to reduce the production and consumption of hydrofluorocarbons. “This is a reversal of China’s attitude, and all eyes are on China now to see if it’s for real,” said Alexander von Bismarck, executive director at EIA.

Additional reporting by Li Wan