New Study: Industrial N2O Projects Under the CDM: The Case of Nitric Acid Production

November 08, 2010

Anja Kollmuss, Michael Lazarus.   Stockholm Environment Institute

N2O Nitric Acid summary (download pdf)

To download the full study go to: http://sei-us.org/publications/id/354

Summary:

Industrial gas projects implemented under the CDM have come under increased scrutiny due to concerns related to high profit margins, potential perverse incentives, and implications for environmental integrity. Given such concerns, the European Union is currently considering banning the use of credits generated by industrial gas projects for the third phase of the EU Emissions Trading Scheme, the largest market for CDM credits.

All industrial gas projects involve the destruction of gases with high global warming potential (e.g. HFCs, N2O, or PFCs), yet the project types vary considerably in terms of mitigation technologies, market circumstances, and accounting methodologies. Prior studies have addressed issues related to HFC-23 destruction and nitrous oxide (N2O) destruction in adipic acid plants. N2O is also an unwanted by-product in the production of nitric acid. Nitric acid is used most commonly to make fertilizers and explosives. This new study by the Stockholm Environment Institute is among the first to consider the merits and drawbacks of N2O abatement projects at nitric acid plants and the associated emission crediting methodologies.

The study suggests that the CDM has successfully fostered innovation and emission reduction in the nitric acid sector which previously had not engaged in abatement practices. The authors judge the risk of leakage to be relatively low for this project type, particularly at current credit prices. The study also finds no evidence to indicate widespread gaming for the purpose of maximizing emission credits.

At the same time, complex methodologies are partly to blame for long delays in the issuance of nitric acid project credits. Two CDM methodologies for nitric acid projects are currently in use: AM0028 for end-of-pipe N2O destruction technology and AM0034 for N2O destruction within the nitric acid manufacturing process (inside the oxidation reactor). There is currently no methodology for new nitric acid facilities, and the current approach does not necessarily incentivize the lowest emitting activities (high emitting processes have more abatement potential, and thus generate more credits per unit of nitric acid produced). To address these and other issues, the authors recommend the introduction of a benchmark factor for baseline emissions for all nitric acid CDM projects, in order to further strengthen the mitigation potential of this project type.