EU urged to outlaw “phantom” N2O carbon offsets

NGO researchers claim CDM creates peverse incentives for manufacturers and 'carbon leakage'

First published in ENDS Europe, 18 October 2010

NGO CDM Watch has called on the EU to bar UN offsets created through nitrous oxide (N2O) emission reductions from entering the EU emission trading scheme (ETS).

In a report released on Monday the pressure group claimed that the UN Clean Development Mechanism (CDM) has created perverse incentives for manufacturers in developing countries. This has caused ‘carbon leakage’ from developed countries and lead to the issuance of 13.5 million tonnes of “phantom” emission reductions.

A study carried out for CDM Watch by the Stockholm Environment Institute concludes that Chinese and South Korean makers of adipic acid have received large subsidies for destroying N2O. In contrast, “large sections of this industry are already voluntarily abating at least 90% of their N2O emissions without monetary incentives,” CDM Watch commented.

The group noted that the CDM Executive Board could theoretically prevent the alleged competitive distortions and carbon leakage. But it complained of the board’s “record of delaying action” and insisted that the EU must take “strong action to put a stop to this offset charade”.

Paris-based chemical producer Rhodia operates two adipic acid plants in South Korea and Brazil and has received almost 65 million CDM credits, according to CDM Watch. A company spokesman has insisted that its recorded emission reductions are “real, measured, permanent and independently verified", newswire Bloomberg reported today.

CDM Watch’s attack on N2O offsets opens up a second front in the campaign by NGOs to reduce the reliance of the CDM on industrial gas projects, which can produce large emission reductions at low cost. The CDM Executive Board is also investigating claims of perverse incentives for the destruction of HFC-23, another powerful greenhouse gas.

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