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Industrial N2O Projects Under the CDM: Adipic Acid – A Case of Carbon Leakage?

Industrial gas projects implemented under the CDM have come under increased scrutiny. The UNFCCC is currently investigating allegations that HCFC-22 manufacturers are gaming the CDM system and undermining carbon markets by intentionally maximizing the emissions they can earn credits for. CDM Watch commissioned a study by the Stockholm Environment Institute to analyze whether adipic acid projects also pose a risk to the environmental integrity of the CDM.

This paper evaluates projects under the Clean Development Mechanism (CDM) that abate N2O emissions from adipic acid production. The analysis shows that carbon markets enabled N2O emissions abatement levels that had not previously been achieved. However, it also indicates that the CDM appears to have caused significant carbon leakage during the economic downturn in 2008 and 2009. We estimate that about 20% of the CERs issued for CDM adipic acid plants for 2008 and 2009 – totaling to about 13.5 MtCO2e – do not represent real emission reductions.

The paper also evaluates policy solutions to prevent such carbon leakage in the future.

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