At its next meeting, the CDM Executive Board will debate proposed revisions to the HFC-23 methodology and whether to  renew  the crediting period for the Ulsan HFC-23 project. Shortly after, Parties in Durban will again discuss whether to allow new HCFC-22 facilities in the CDM. We explain why the new methodology is innovative but not stringent enough, what we think the Board should do instead and why it is important to keep Montreal in mind while in Durban.

CDM Executive Board will discuss the revisions to the HFC-23 methodology (AM0001) at its next meeting starting November 21st.  The revisions^[1] involve some innovative changes that would encourage HCFC-22 producers to not only destroy the HFC-23 from production lines that can earn CDM credits but also from production lines that are not eligible under the CDM (because they were added later). Instead of using a waste generation rate of 1%, projects could use 1.2% and therefore earn 20% more CERs if they can show that they also destroyed the non-eligible HFC-23. The way the methodology is designed, this could lead to an atmospheric benefit (more HFC-23 would be destroyed that is credited).

CDM Watch welcomes the careful redesign of the methodology. However, we do not think that the proposed waste generation rates of 1% and 1.2% cut down profits enough to avoid unintended negative effects such as undermining the phase out of emissive HCFC-22 under the Montreal Protocol.

CDM Watch recommends:

We urge the CDM Executive Board to reject the revised methodology unless the waste rates are reduced to:

– 0.2% for crediting of HFC-23 destruction in CDM lines only

– 0.3% for crediting of HFC-23 destruction in CDM lines and non-CDM lines.

HFC-23 crediting rules need to change immediately

Even a very stringent new methodology would only apply to projects once they renew their crediting period. To stop the exorbitant profits projects are currently making, changes need to take effect immediately so they take effect for the current crediting period.

Last year, CDM Watch submitted a request to clarify current crediting rules for HFC-23 abatement projects (AM_CLA_0191). We sought to clarify how the waste generation rate should be calculated for HCFC-22 production plants where key components have been replaced or retrofitted. The introduction of more efficient production techniques would logically lead to the reduction of the baseline waste generation rate but the wording of the methodology is unclear on this point. The request was first discussed at the Methodologies Panel meeting in the fall of 2010. However, the Methodologies Panel did not make a specific recommendation to the Board. While a revised methodology will only apply to new crediting periods, such a clarification would already impact the current crediting period, and help safeguard the environmental integrity of this project type.

CDM Watch recommends:

We urge the CDM Executive Board to put this clarification request CLA_0191 on the agenda and to make changes to the crediting rules of HFC-23 that take effect immediately.

HFC-23 project seeks to renew its crediting period

The CDM Executive Board will once again discuss what to do with project 0003 HFC Decomposition Project in Ulsan which has applied to renew its crediting period. The project has received almost 10 million CERs in its first 7-year crediting period. If the CDM Executive Board went ahead and renewed the project under the original methodology the project would likely receive another 10 million CERs  based on the flawed rules of the original methodology and further undermining the CDMs integrity.

CDM Watch recommends:

We urge the CDM Executive Board to reject the request for a renewal of the crediting period of project 0003 HFC Decomposition Project in Ulsan.

Parties to the UNFCCC again discuss what to do about new HFC-23 plants

For years nations have been arguing if new HCFC-22 facilities should be eligible under the CDM to destroy their HFC-23. Currently they are not. The issue will be discussed again at the UNFCCC’s November meeting in Durban.^[2]

The issue is complicated and politically tricky. Not all HCFC-22 production is covered under the Montreal Protocol. When HCFC-22 is used as a ‘feedstock’ (a product that is then turned into something else), it does not lead to ozone depletion because it is not released to the atmosphere. Such HCFC-22 feedstock uses are therefore not covered under the Montreal protocol, only ‘emissive’ uses such as refrigerants. However, both feedstock and emissive uses still produce the very potent GHG HFC-23 as a waste product.

Parties have argued for years about whether all HFCs should be covered under the Montreal Protocol.  There are many different types of HFCs. Many HFCs are refrigerants used to replace ozone-depleting CFCs and HCFCs. As these are being phased out, HFC production is likely to increase, especially given the growing demand for air conditioning in developing nations.

In 2010, 91 Parties to the Montreal Protocol signed a statement to “declare our intent to pursue further action under the Montreal Protocol aimed at transitioning the world to environmentally sound alternatives to HCFCs and CFCs.”^[3] Parties to the UNFCCC have put forward different proposals of how HFC-23 emissions from new HCFC-22 facilities should be addressed under the UNFCCC so it does not undermine the goals of the Montreal protocol. The proposals include:

1. Keep the ban on new facilities
2. Allow new facilities under the CDM and mediate risks by:

• Establishing a more stringent benchmark (as is proposed in the revised methodology for existing CDM HFC-23 facilities, see above)
• Taxing them (which China already does at 65%)
• Limiting the use of the CDM to new facilities that produce HCFC-23 for feedstock purposes only.

The HFC issue remains unresolved and it is unlikely that parties will decide anything new in Durban. In other words new HCFC-22 facilities are likely to remain ineligible under the CDM. A good solution would be to simply pay for the incremental costs of HFC-23 incineration in all HCFC-22 production plants in developing countries, implemented under the Montreal Protocol. The Montreal Protocol already has the necessary expertise and infrastructure, including a fully operational financial mechanism to provide sufficient financial and technical assistance to developing countries. Alternatively, HFC-23 destruction in new HCFC-22 plants could be tied into developing country Nationally Appropriate Mitigation Actions (NAMAs).

CDM Watch recommends that Parties should:

• Continue ban of new HFC-23 projects in the CDM
• Closely coordinate new initiatives with Montreal Protocol. New mechanisms for the destruction of HFC-23 under UNFCC must not provide perverse incentives to delay the phase out of HFCF-22 under Montreal
• Ask the CDM Executive Board to apply methodology revisions immediately to all projects.