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Meth Panels

November 30, 2010

It is interesting to see that the controversy over the true emissions reductions generated by HFC23 projects in the Clean Development Mechanism – one of the Kyoto Protocols two emissions offset mechanisms – is now developing along 2 different tracks.

On the one hand, we have the EU which has recently released a draft proposal (just last week) to restrict ban emissions credits generated from these projects (along with adipic acid N2O projects) from being used for compliance by companies in the EU Emissions Trading Scheme. This would cut off a large share of the demand for such credits worldwide. The EU wants to ban the projects’ credits because they have such high returns relative to production costs of the underlying gas products that there is a strong incentive to game the system and product extra emissions just to reduce them again to gain credits.

For this reason also, the EU is seeking to get an agreement at the Cancun negotiations this fortnight to have these projects significantly curtailed for other countries under the CDM. An advanatage of doing that is that it will force emissions offset project developers to invest in other more environmentally beneficial projects, like energy efficiency in buildings and lighting in developing countries, etc.

At the same time however, the Executive Board of the CDM’s Methodological Panel (“Meth Panel”) has just released a report which is apparently  (according to Point Carbon, subs’n req’d) finding that the projects have generally not been exploited across the board, although in some cases yes. Personally, I’ve seen good evidence that N2O projects from adipic adic do lead to distorted incentives that create large amounts false emissions offsets and it seems that CDM Board has acknowledged this in calling for a change in methodologies for crediting for these projects (HFC and N2O) in the future. Presumeably they will await what the COP16 summit at Cancun advises them to do. Still, even if nothing came out of Cancun for the EB, it seems like they would be going down a path towards reviewing these methodologies worldwide anyway. My understanding is that they would have a mandate to do that, since they are the methodology guys. That said, this issue could become very political very fast. Let’s wait and see what happens in Cancun…

Update: According to Point Carbon, “Last week the 58th meeting of the executive board decided that the methodology for HFC 23 projects should be revised, but a new crediting methodology will only apply to projects after their current crediting period expires.”

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