Chemical Company Profits From Double Counting Of Carbon Credits

CHEMICAL COMPANY PROFITS FROM DOUBLE COUNTING OF CARBON CREDITS

UN Official Daniele Violetti "Not Aware" of the Problem

Excerpted from The ENDS Report

July 2007

ENDS has learned that chemical corporation Rhodia is using carbon credits from the Clean Development Mechanism (CDM) to meet voluntary corporate targets -- only to sell them at a profit to be counted again elsewhere. Cement company Lafarge has not ruled out the same practice.

Companies like Rhodia can use CDM credits to comply with mandatory targets under the EU Emissions Trading Scheme. But they can also use them to meet voluntary carbon reduction commitments or to make "carbon neutral" claims, or sell them on the market.

Rhodia and other companies are counting the credits they generate towards their own voluntary emissions reductions and then selling them, thereby enabling other organizations to claim the reductions as well.

The practice is necessarily harming the climate. In the carbon market, one tonne of credits is designed at best to "neutralize" one tonne of emissions. If the same one tonne of credits is used to license two tonnes of emissions, the net effect is negative.

Rhodia's 2006 sustainable development report says two CDM projects that cut emissions of the greenhouse gas nitrous oxide at its plants in Paulina, Brazil and Onsan, South Korea "will enable Rhodia to . . . place 11-13 million tonnes of carbon dioxide emission credits on the quotas market." The report adds "the initial reductions were audited and 1.6 million tonnes of CO2 emission credits were received and sold". With CDM credits trading at around EUR10 each, the sale may have earned Rhodia about EUR16 million. But the cuts have also contributed significantly to the emissions reductions Rhodia claims in the report.

A spokesperson for Rhodia claimed that "there is absolutely no double counting" because the company was not using the credits from the two projects toward its EU ETS targets. She appeared unaware that counting credits, which it later sells, toward its voluntary targets is also double counting.

Lafarge is meanwhile claiming to be meeting its voluntary emissions reduction targets partly through a CDM project in Malaysia that employs oil palm kernel shells in place of coal as a fuel for its cement plants. Yet it also contemplates selling the same credits on to a third party. Vincent Mages, Lafarge's climate change vice president, says that this "just means a revenue for Lafarge as for any company doing the same type of CO2-reducing investment in a [developing] country".

In a baffling statement, Mages said that "the buyers of such credits are buying a tradable financial product, a commodity, but certainly not a CO2 reduction recognition". This contradicts official UN language, which claims that CDM credits are "emission reductions".

The comments come as a further embarrassment for environmental group WWF, which has a seven-year-old partnership with Lafarge aimed at reducing its climate change impacts. No one was available for comment at WWF. In June, ENDS revealed that WWF has no effective strategy for curbing the cement giant's rapidly growing CO2 emissions from operations in developing countries like China.

Daniele Violetti, UN CDM registry and issuance team leader, said that the UN was "not aware" of the problem. "Officially the companies are not doing anything wrong," he said. The use of credits to meet voluntary company targets was, he explained, "outside the purview" of the CDM Executive Board.