Another Spectacular Example of the Failure of International Carbon Trading

Today's New York Times has a nice front page story about how factories in developing countries that produce coolants have been cashing in on the carbon markets in Europe. As the Times explains:

Greenhouse gases were rated based on their power to warm the atmosphere. The more dangerous the gas, the more that manufacturers in developing nations would be compensated as they reduced their emissions.

But where the United Nations envisioned environmental reform, some manufacturers of gases used in air-conditioning and refrigeration saw a lucrative business opportunity.

They 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 released in the manufacturing of a widely used coolant gas. That is because that byproduct has a huge global warming effect. The credits could be sold on international markets, earning tens of millions of dollars a year.

That incentive has driven plants in the developing world not only to increase production of the coolant gas but also to keep it high — a huge problem because the coolant itself contributes to global warming and depletes the ozone layer. That coolant gas is being phased out under a global treaty, but the effort has been a struggle.

So since 2005 the 19 plants receiving the waste gas payments have profited handsomely from an unlikely business: churning out more harmful coolant gas so they can be paid to destroy its waste byproduct. The high output keeps the prices of the coolant gas irresistibly low, discouraging air-conditioning companies from switching to less-damaging alternative gases. That means, critics say, that United Nations subsidies intended to improve the environment are instead creating their own damage...

Carbon trading has become so essential to companies like Gujarat Fluorochemicals Limited, which owns a coolant plant in this remote corner of Gujarat State in northwest India, that carbon credits are listed as a business on the company Web site. Each plant has probably earned, on average, $20 million to $40 million a year from simply destroying waste gas, says David Hanrahan, the technical director of IDEAcarbon, a leading carbon market consulting firm. He says the income is “largely pure profit.”

And each plant expects to be paid. Some Chinese producers have said that if the payments were to end, they would vent gas skyward. Such releases are illegal in most developed countries, but still permissible in China and India.

Gotta love unintended consequences!

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  • Pro Libertate||

    I'm selling scam credits. Making a killing.

  • Fist of Etiquette||

    Sounds like a scam to me.

  • Pro Libertate||

    No, it's a metascam.

  • ||

    I'd be more interested if you were selling integrity credits.

  • Pro Libertate||

    The market in those is too small.

  • some guy||

    Unintended consequences? Say it ain't so.

    There are proven sources of environmental harm out there that need to be dealt with. Not only is anthropogenic global warming (AGW) alarmism distracting us from dealing with these problems, but it is actually exacerbating them. Yet more evidence that AGW alarmism was never about the environment but always about gaining power over the economy.

  • T o n y||

    Yeah well no one ever intended to cause global warming, so that was an unintended bad consequence of the status quo.

  • ||

    Seriously? That's the best you can puke up?

  • Raston Bot||

    That might be the funniest unintended consequence ever. Creative too. Damn Chinese beat us at everything.

  • ||

    Try http://freecarbonoffsets.com. Why pay for anything that you can just print? And it'll ease your conscience just the same.

  • Cliché Bandit||

    What is truly ironic is that it created a Coasian relationship with China and India where none need exist before.

    Reminds me a little of that Cosby routine about Adam and Eve, "Come here, Come here, Come here, get away, get away, get away."

  • fried wylie||

    carbon credits are listed as a business on the company Web site

    Stupid non-english comment prohibition.

  • The Late P Brooks||

    But where the United Nations envisioned environmental reform, some manufacturers of gases used in air-conditioning and refrigeration saw a lucrative business opportunity.

    Unforeseeable!

  • fried wylie||

    Goddamn primitives, operating by market forces instead of the Grand Vision Of Wise Central Planners.

  • Citizen Nothing||

    That governments push these schemes instead of a straight-up carbon tax shows that lower emissions aren't really their primary goal.

  • Brett L||

    I think the real problem is that CO2e is a poor system because it doesn't really address what the stable concentration of these GHG chemicals will be. Except for CO2, which is figured at a given concentration (378ppm). Also, I find the idea that a given hydrofluorocarbon being around in the atmosphere for 270 years unfeasible. Sorry. We already know that fluorocarbons and chlorofluorocarbons don't hang around that long. Remember the ozone hole stuff from the late 80s? Why don't we still bang that drum? Because reducing the output of FCs and CFCs not only stabilized the concentration in the atmosphere, but led to a dramatic reduction in a much shorter timescale.

    Additionally, the CO2e system was set up for modelling and we certainly don't have sufficient datasets going back more than 50 years on this to verify our predictions.

  • Enjoy Every Sandwich||

    A "market" created by lefties who don't know anything about markets except that they despise them? It's a provocative concept.

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