World Bank under fire over support for HFC-23 projects

Environmental Investigation Agency accuses bank of publishing misleading information on projects funded through the Clean Development Mechanism

Campaign group the Environmental Investigation Agency (EIA) has criticised the World Bank after the bank defended its funding of HFC-23 destruction projects designed to cut carbon under the Clean Development Mechanism.

The CDM was established by the UN in 2003 to fund greenhouse gas mitigation projects in developing countries. The credits generated can be bought by developed countries to help meet carbon reduction emissions targets under the Kyoto Protocol, by firms subject to the EU emissions trading scheme and by voluntary carbon offsetters.

Over half of all credits generated by the CDM to date come from just 19 projects built to destroy HFC-23, a powerful greenhouse gas that is a by-product of manufacturing HCFC-22 for use in refrigeration and air conditioning systems. HCFC-22 is also a powerful greenhouse gas and ozone depleting substance that is being phased out under the Montreal Protocol.

Earlier this summer, the UN launched an investigation after campaign group CDM Watch submitted evidence that some plants are increasing the amount of HFC-23 they generate in order to maximise the amount of credits they can earn. Some chemical manufacturers in China and India, where most of the plants are located, earn as much or more from being paid to destroy HFC-23 as they do from manufacturing HCFC-22 (ENDS Report, July 2010). The UN has frozen issuance of credits to six HFC-23 projects, included one funded by the World Bank, until the investigation is complete.

The World Bank’s Umbrella Carbon Facility invests in two of the largest HFC-23 incineration projects, both of which are named in CDM Watch’s evidence.

In response to the criticisms, the World Bank issued a briefing document on HFC-23 projects. However, an analysis paper by the EIA says the briefing is misleading and contains a numbers of errors.

For instance, the World Bank argues that production of HCFC-22 and HFC-23 in China and India is driven by growing domestic demand for air conditioning and refrigeration equipment and not by the CDM. But the EIA says the CDM is effectively subsidising production of environmental damaging substances and preventing users switching to low-impact alternatives (ENDS Report, February 2010).

The briefing also claims that the CDM has not prolonged the lifetime of HCFC-22 plants, but both the Montreal Protocol Multilateral Fund Secretariat and the UN’s CDM panel have suggested the contrary.

The briefing also states that the phase out of HCFCs under the Montreal Protocol will not have a immediate effect on production of HCFC-22. But the EIA says current increases in HCFC-22 production will make it much tougher for developing countries to meet the phase out requirements for 2015-2030.

ENDS has seen a copy of the briefing, but the World Bank has removed it from its Umbrella Carbon Facility website. A World bank spokesman said it was taken down for review because it was “confusing people”. ENDS has made the document available here.

The World Bank said it welcomed the UN investigation and looked forward to its findings.