Air conditioners in Nanjing, China, via Let Ideas Compete/Flickr
Following the announcement by the United States and China that they will cooperate on phasing out super greenhouse gases—while not actually providing any timetable for doing so, of course—comes a new report from the Environmental Investigation Agency showing how truly screwed up market mechanisms for controlling pollution can get.
The EIA report focuses on hydrochlorofluorocarbons (HCFCs), which have replaced ozone-depleting chemicals for use as coolant in things like refrigerators and air conditioners. But while HCFCs don't deplete the ozone, they are incredibly powerful greenhouse gases.
For example, when HCFC-22 is made, a by-product called HFC-23 is created, and which has a global warming potential nearly 15,000 times than of carbon dioxide. HFC-23 can easily be destroyed and kept out of the atmosphere, which some clear air credits are designed to incentivize. But it can also just be vented into the air.
According to the EIA report, some companies producing HFC-23, especially ones in China and India, have found a way to profit handsomely under the Clean Development Mechanism: By creating more of the gas than necessary and then earning carbon credits for destroying it.
Last August the New York Times ran an exposé on this, saying that some 19 factories in India and China,
...quickly figured out that they could earn one carbon credit by eliminating one ton of carbon dioxide, but could earn more than 11,000 credits by simply destroying a ton of an obscure waste gas normally release in the manufacturing of a widely use coolant gas. [...] The credits could be sold on international markets, earning tens of millions of dollars a year. [...] The manufacturers have grown accustomed to an income stream in some years accounts for half their profits. The windfall has enhanced their power and influence. As a result, many environmental experts fear that if manufacturers are not paid to destroy the waste gas, they will simply resume releasing it into the atmosphere.
Since the European Emissions Trading System banned the trade in credits obtained from the destruction of HFC-23, the market for these credits has collapsed—bringing us to the EIA investigation.
Now that HFC-23 isn't worth anything, Indian and Chinese manufacturers are either already just releasing HFC-23 into the atmosphere or are threatening to if they are not paid to destroy it.
The threats amount to holding the climate hostage. The EIA calculates that if other plants producing HCFC-22 in developing nations also attempt to get more money for the destruction of the HFC-23, "it would cause the release of more than two billion tons of carbon dioxide equivalent into the atmosphere by 2020, more than the global fleet of cars emits each year."
There are some far-from-certain assumptions in that calculation—the loophole in the CDM that allowed this whole 'pay up or the planet gets it' situation to develop has effectively been closed and I imagine a solution will be found before the 2020 timeframe mentioned—but it's definitely not a good situation.
For its part, China recently pledged (this is separate from the US-China statement mentioned above) that it will begin reining in production of HCFC, receiving funding as part of the Montreal Protocol to the tune of $380 million to close all of its plants producing the gas by 2030. China is responsible for the production of 92 percent of all the HCFC in the developing world.
EIA senior campaigner Clare Perry advises,
Any venting of HFC-23 is a monumental scandal, given that destroying HFC-23 is about the cheapest climate mitigation available and the billions already made by the companies through the CDM. The EU is considering legislation that will mandate destruction of all HFC-23 by-product and we strongly urge China, India and all other countries with HFCF-22 facilities to do the same, and ensure all of these plants bring HFC-23 emissions down to zero.
Furthermore, the EIA says HCFC producers in developed countries—Dupont, Honeywell, and Arkema are singled out—should also rein in their emissions of HFC-23, noting that as 99.99 percent of these emissions can technically be reduced, "these is no excuse for continued HFC-23 emissions from these companies."