UN report fuels charges of manipulation in $2.7 billion carbon-cutting market

UNITED NATIONS (AP) — European and U.S. environmentalists demanded action Friday after an obscure U.N. advisory panel lent credence to their claims that industrialized nations are wasting billions of dollars on carbon-cutting projects.

The dispute revolves around the validity of some of the largest projects funded by the $2.7 billion U.N.-managed Clean Development Mechanism.

The "CDM" — a component of the 1997 Kyoto Protocol for cutting heat-trapping greenhouse gases — essentially allows industrial nations that are required to cut their greenhouse gases to pay developing nations to cut theirs instead.

They do so by paying 22 chemical makers in China, India and other developing nations to destroy a potent greenhouse gas, HFC-23, rather than let it vent into the atmosphere.

They are paid as much as $100,000 for every ton destroyed because it is based on how much more powerful the chemical is as a climate-warming gas than carbon dioxide — in this case, more than 10,000 times.

But HFC-23 is a byproduct of the refrigerant HCFC-22, a chemical the plants are paid to produce under the U.N.'s 1987 Montreal Protocol for fixing the Earth's ozone layer. HCFC-22 is used in home appliances, some refrigerators, hair sprays and air conditioners.

Until recently, the 196-nation ozone treaty had overlooked the global warming impacts of some of the replacement chemicals, like HCFCs, and their byproducts, HFCs, whose use has grown because of the Montreal treaty. But in 2007, nations agreed to speed the elimination of HCFCs.

Environmentalists had asked the methodologies panel that advises the CDM executive board to investigate their claims that the chemical makers are exploiting an apparent conflict of interest between two U.N. treaties.

They say the plants make so much money destroying HFC-23, they're less inclined to phase out making HCFC-22 because that would lessen production of the byproduct HFC-23.

The report issued on the CDM advisory panel's Web site late Thursday seemed to agree, saying it found "a strong incentive to prolong the operation ... or not improve the efficiency" of the plants that produce HCFC-22.

The panel urged the CDM executive board to take up the matter.

It's a loophole that allows "phony carbon credits" under rules that the CDM executive board must now change, the groups CDM Watch, Noe21, Environmental Investigation Agency and German NGO Forum on Environment and Development said Friday.

"It is clear that the CDM's current HFC-23 program is financing and working against its own goal of producing reductions of greenhouse gas emissions for offsets," said EIA's Fionnuala Walravens. "This type of abuse is gambling with our planet's ecology."