The incredible profits made by HFC-23 projects are resulting in overproduction of cheap HCFC-22, and undermine global efforts under the Montreal Protocol to phase out HCFCs and move industry toward more environmentally friendly refrigerants.
The Montreal Protocol agreed in 2007 to accelerate the phase-out of HCFCs not just because of their ozone-destroying properties but also because they are potent greenhouse gases. In April 2010, the Montreal Protocol’s Multilateral Fund (MLF) agreed to guidelines on eligibility and criteria for funding the phase-out in developing countries. As national phase-out plans are implemented, some developing countries will be in the position of receiving funding from the Montreal Protocol to reduce production of HCFC-22, while the CDM subsidises and promotes that same production.
The MLF has already identified that the facilities likely to be targeted for early phase-out are those registered under the CDM for HFC-23 destruction. The current CDM rules state that in order to be eligible for HFC-23 projects, HCFC-22 factories must have an operating history of at least three years between January 2000 and end of December 2004. As a result, older HCFC-22 factories tend to be those covered by the CDM, with newer ones not being eligible. This is likely to conflict with the accelerated HCFC phase-out, as older factories tend to be prioritised for closure. Moreover, it is possible that CDM-financed older factories will displace newer factories with lower HFC-23/HCFC-22 ratios, and thus negate the potential to reduce the production of HFC-23 through technological improvements.
There are also legitimate concerns that the CDM will exacerbate the potential for developing a black market trade in HCFC-22. The second largest HFC-23 facility under the CDM, Shandong Dongyue Chemical Company Ltd, which generates more than 10 million CERs each year, has previously been implicated in the illegal trade in ozone-depleting substances (ODS).
Global HFC-23 emissions still rising
The production of HCFC-22 is growing in developing countries by about 25% per year, and while the Montreal Protocol plans to phase out emissive (non-feedstock) uses by 2030, use for feedstock production is not controlled and is likely to continue to grow in developing countries. As a result, global HFC-23 emissions have significantly increased over the last two decades, and although recent studies reveal a decline in emissions since 2006 associated with CDM destruction projects, over half of the developing world’s HFC-23 production is still emitted.
A 2009 study in Geophysical Research Letters examining atmospheric concentrations of HFC-23 estimated average global HFC-23 emissions for 2006-2008 at about 200 million tonnes CO2-eq per year, around 50% higher than levels derived for the 1990s. The increase is attributed to developing country HCFC-22 production, with emissions in 2007 were estimated to be 160 million tonnes CO2-eq. The study noted that substantial amounts of HCFC-22 were produced but not covered by existing CDM projects (around 57% in 2007).
 Executive Committee of the Multilateral Fund for the Implementation of the Montreal Protocol. Further Elaboration and analysis of issues pertaining to the phase-out of HCFC production sector. UNEP/OzL.Pro/ExCom/57/61 27 February 2009
 Report of the 44th Meeting of the Methodologies Panel. 21-25 June 2010 http://cdm.unfccc.int/Panels/meth/index.html The note on the revision request by the Methodoloy Panel can be found at http://cdm.unfccc.int/Panels/meth/meeting/10/044/mp44_an02.pdf
 Executive Committee of the Multilateral Fund for the Implementation of the Montreal Protocol. Further Elaboration and analysis of issues pertaining to the phase-out of HCFC production sector. UNEP/OzL.Pro/ExCom/57/61 27 February 2009.
 1Gg HFC-23 = 1000 tonnes HFC-23 = 11,700,000 CO2-eq tonnes
 Montzka et al., ibid