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Carbon trading - the Chinese report card : Comments
By Charles Worringham, published 5/9/2007There are lessons to heed from the world's single most expensive carbon emissions trading deal in China.
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Posted by Taswegian, Wednesday, 5 September 2007 11:23:54 AM
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This news doesn't justify the claim that market mechanisms cannot capable of reducing emissions. Unmonitored "offsets" may be questionable (not always fraudulent), but that's not what Kyoto-covered CDM investments or emisison permit trading is -- they require strict emissions accounting.
The first year of monitoring at the CDM project at Jiangsu Meilan Chemical Co. shows that more stringent quality-control is still required, but the project has mainly been successful. The growth of Chinese industry has been so spectacular it's almost cancerous -- quality control is very haphazard; a few factories have world-class monitoring, cleanly and efficiently producing a world-class product, while many are toxic sweatshops and firetraps. This aging freon factory has simply vented waste trifluoromethane to the atmosphere for many years. Now its emissions are negligible: this is a CDM *success*, not a failure. Any escape of trifluoromethane due to "incompetence" costs it money. For crass, unnecessary pollution to go unabated in China (and Australia) is simply absurd when businesses elsewhere must pay good euros for permits on the emissions from finely-tuned fuel consumption. The discrepancy that the nominal cost of the incinerator was just $5m but the abatement is worth $500m under the CDM is a simple consequence of different rates of development -- the same arbitrage that has driven international investment since "Jeremiah's nutmeg". Much of the money has gone on monitoring and accounting and World Bank consultants. Manufacture and import of CFCs under the Montreal Protocol was banned in developed countries by 1996. China does not export CFCs or CFC-containing equipment and only produces them for domestic use (so there's no point stopping Chinese-made fridges at customs, Taswegian). It was envisaged at the start of this CDM project that domestic use freon would increase for a few more years, but China announced in July a ban effective 2010 (largely as a result of CDM money making it profitable to do so) so Jiangsu Meilan will now have to spend its "bribe" on a refit to make ozone-friendly HFC refrigerants. http://www.reuters.com/article/environmentNews/idUSPEK24608020070627 Posted by xoddam, Wednesday, 5 September 2007 1:10:40 PM
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I agree with Xoddam - the destruction of HFC23 under the Clean Development Scheme does represent a success - a point I acknowledged. However, is he sure that the Chinese ban he cites in the Reuters reference doesn't cover only Class I ozone depleting CFCs (i.e. EXCLUDING HCFC22, the substance whose by-product is the subject of the World Bank scheme at Jiangsu Meilan)? Even if HCFC22 IS covered in the ban, and it would be great news if it is, it was always an option for the Chinese to control or prevent HFC23 emissions relatively inexpensively, and they didn't. I'm not persuaded that the CDM brought about or hastened this ban. It certainly didn't reduce HCFC-22 production!
The broader point, of course, is that it is only through clearly quantifiable abatement, and strict, timely and objective verification that trading schemes can work. My greatest concern is that Australia will devise a scheme that is too loose, one that is hard or impossible to monitor adequately, and rife with opportunity for activities closer to pyramid schemes than greenhouse gas abatement. Market mechanisms should and will have a role, but so should straight-forward, direct regulation. Posted by Charles Worringham, Wednesday, 5 September 2007 4:01:53 PM
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Here are two predictions.
1. That no carbon trading scheme will actually reduce emissions in real terms. 2. The place to make money - real money, obscene money - over the next fifteen years will be to be a carbon trader. I'd love to be proved wrong, but I've been on this planet too long to believe this type of scheme will actually deliver results to anyone except the middle man. Posted by Pericles, Wednesday, 5 September 2007 6:00:26 PM
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Sorry all, I got mixed up, dropped an H and spouted nonsense. CFC, HCFC and HFC are three different things, and I think everyone here has typed one of them wrong at some point :-)
When we say developed countries banned CFCs in 1995, we're referring to Class 1 ozone-depleting substances: chloroflourocarbons (*without* hydrogen) and all halons (bromofluorocarbons). Class 2 ODSes (HCFCs) are still in use worldwide. China's ban this year was indeed a ban on Class 1 ODSes. China agreed when it acceded to the Montreal Protocol phase out Class 1 substances by 2010 and Class 2 by 2040. One report says 550 tons per annum of CFCs will still be made in China, strictly for asthma puffer propellant: http://www.unep.org/Documents.Multilingual/Default.asp?DocumentID=514&ArticleID=5624&l=en Now that's a lot of puffers. Dudes, clean your AIR! Most spray cans now use flammable and toxic hydrocarbon (propane, butane, dimethyl ether) propellants. CFCs held out for medicinal use until recently. Puffers use HFCs here now, so I suppose China will follow. HCFC-22 (aka "Freon 22", not to be confused as I did with the original Freon, CFC-12) is a Class 2 ODS. It's the preferred substitute for CFC-12, with a twentieth of the ozone depletion potential. It's still in common use, still manufactured in developed countries, and imported fridges do contain it. I apologise for my error. The Montreal-mandated phaseout of Class 2 ODSes is not until 2030 for developed countries and 2050 globally. Almost all new designs prefer HFC refrigerants which are not ozone-depleting at all. The USA will *start* its phaseout of HCFC-22 in 2010, banning new products using it, but does not intend to ban manufacture altogether until the 2030 mandate. Australia doesn't make HCFCs and intends to restrict imports only from 2020, banning them in 2030. Pericles, emissions trading with a hard cap will find the cheapest ways to reach the targets. CDM arguably hasn't achieved anything regulation couldn't have done alone, but it's made people rich along the way. Is there something wrong with that? Posted by xoddam, Wednesday, 5 September 2007 7:13:12 PM
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Here's a clue to the veracity of the carbon trading market; after much thought Stern thought $US85 was about the right price for a tonne of CO2. Yet some travel offset providers charge as little as $5 a tonne and apparently still make a tidy profit. When you see snake oil salesmen in cowboy movies now you know how they were reincarnated.
Posted by Taswegian, Wednesday, 5 September 2007 10:09:22 PM
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Similarly the Clean Development Mechanism seems to be a vehicle for assuaging middle class guilt but ends up being economic blackmail. The correct approach to the Chinese CFCs would be to impound any fridges containing it at Customs. Much cheaper than a half billion dollar bribe. Imagine if someone in a crowded lift said 'give me money or I'll fart'. As far as I'm aware neither Turnbull nor Garrett see anything wrong with offsetting. Looks like continued carte blanche for the coal industry but more pork barrelling for tree farmers.