Carbon Market Watch

For fair and effective climate protection.

SGS requesting issuance for non-additional CERs: request for review entitled “incompetence” (Newsletter #6)

09 Feb 2010

In total, four projects that reduce N2O from adipic acid production are currently registered in China, South Korea and Brazil. CDM revenues of Millions of Euros for these plants have caused a production shift from industrialized countries to these four projects which have caused a plant in Singapore to stop production and production in industrialized countries is going down in a similar way. Although the methodology is limited to existing capacity of these plants by the end of 2004, they all run far above their capacity which results in a major excess of CERs issued and requested.

Further to a clarification request by the DOE SGS, the Board previously considered the cap on historical production of adipic acid projects (EB 48) to address this problem. Unfortunately the Board failed to establish a stringent cap but decided to set it at the maximum daily adipic acid production multiplied by 365 days. For the project activity “N2O decomposition project of PetroChina Company Limited Liaoyang Petrochemical Company” SGS has now requested the issuance of 2.244.051 CERs for the monitoring period 1 December 2008 – 31 January 2009. The requested amount of CERs equals about 27 Mill € to be divided between Natsource Asset Management Corp (Canada), Goldman Sachs International (UK) and Fortis Intertrust (Netherlands) B.V.

However, 3 suspicious Board members have requested review indicating that SGS had ignored this weak cap by over-requesting issuance of CERs for this project. With the reason for review entitled “incompetence”, SGS (which was previously suspended because of under-qualified staff) was asked why the actual accumulated production is 140,095.39 t above (!) the value defined in the registered PDD (140,000t/year).

Another request for review for CER issuance is pending for the consecutive period 1 February 2009 – 13 March 2009 of the same project for the same reason: 1.495.178 CERs should be issued while the issuance request overestimates production by 158,087.899 t above the value defined in the registered PDD (140,000t/year).

Like this example shows, this ongoing carbon leakage results in the issuance of millions of CERs without any real emission reductions. Since January 2010, 1.661.358 CERs have been issued for the Korean project 0099 (for the period 1 September – 14 October 2009) and 582.005 CERs were issued to the Brazilian project 0116 for roughly 2 weeks of production (from 9 – 24 September 2009). Switzerland, Japan, Netherlands, United Kingdom and France share the cake.

Action to be taken by the Board: the issuance requests must be rejected and SGS must be sanctioned for having requested excessive CERs. Moreover, previous issuance requests by SGS must be reviewed. Finally, the methodology for existing plants (AM0021) must be revised to address the ongoing carbon leakage.