A 'perverse incentive' at work?
Last month, a coalition of carbon market monitoring groups sent a letter calling on CDM offices to look into suspicious behavior at some of the 19 plants. It charges that since 2005, a small number of firms have deliberately produced excess greenhouse gas pollution for the sole purpose of destroying it, earning far more CERs than they would have if they tailored production of HCFC-22 to market demand and not the CDM.
Firms under fire in China and India deny the claims, saying that they haven't manipulated any production data turned in.
But that's precisely the point, the groups say. They assert that the production data show that the companies are pumping volumes of HCFC-22 output far beyond market demand, and even through the worst global recession since the 1930s. Other abuses are alleged -- namely, that manufacturers are deliberately injecting fluorine gas into the process to create more HFC-23 waste.
"What the NGOs [nongovernmental organizations] would like is that they suspend the issuance of HFCs while the investigation is carried out," said Sandbag's Bryony Worthington.
Worthington said her organization isn't accusing firms of outright corruption. Nevertheless, she believes it is obvious that the rules as they exist create a "perverse incentive" to generate pollution for its own sake. HCFC-22, it turns out, is also a powerful greenhouse gas, and activists worry that any excess that manufacturers can't sell is simply being vented into the atmosphere.
What outcome the board will reach is not clear. Members themselves refuse to speculate.
Worthington said they could push the agenda item to the next meeting, to give more time for a thorough investigation. But she and others fear that the board will decide that the issue is far too political for it to take up, leaving it to the international climate negotiators to decide what to do.
Labudde says that's the worst possible outcome.
Outside groups want payments suspended
"The contracts that the Chinese and Indians have on these plants are so lucrative that they very much like to maintain them," he said.
Moves are afoot by the United States, Canada and Mexico to move all HFC gases under the Montreal Protocol's jurisdiction. The gases could be destroyed much more cheaply and easily under Montreal, experts say. But activists report pushback by India and China, which want them kept under the CDM.
"They're basically using the renewal for these [CDM] projects, at least China is, maybe as a condition ... for allowing the Montreal Protocol to regulate production and use" of HFC gases, Labudde said.
It's simply a matter of profit, says Worthington.
"The fact that you can all this money means there's now a disincentive to do anything else in that regulatory space to try and control these emissions," she said.
The battle over HFC-23 is heating up. Earlier this month, a coalition of nongovernmental organizations, including the Environmental Investigation Agency and CDM Watch, briefed E.U. parliamentarians in Brussels on the matter, attempting to drum up political support. And an aggressive letter-writing and media campaign is under way in the hope of pressuring the CDM board to suspend CER issuance this week -- putting millions of dollars on hold.
Critics and supporters of the CDM say improvements in the system have been made of late. But greater challenges lie ahead.
The board is in the midst of tweaking CDM work rules to speed up project registration and CER issues. A recent letter from the Carbon Markets & Investors Association praised the board for these moves and its efforts "to codify and explain procedures and decisions in a transparent and open manner."
Issues of conflicts of interest among the board members themselves have also been addressed, though not to the full satisfaction of CDM watchers. The board has adopted a code of conduct for members, and members' resumes are now available to the public for review. Still, only a handful of mostly Western members vocally indicate conflicts between themselves and projects under review before every meeting, while the rest remain silent.