Solvay Plant May Have Earned Most From UN Carbon Offsets Sales

Solvay SA (SOLB)’s chemical factory in Ulsan, South Korea, may have earned the most from selling United Nations carbon offsets in the five years through 2012.

The facility was awarded more than 73 million Certified Emission Reductions from 2005 to last month, according to UN data compiled by Bloomberg, the most of any individual project registered under the UN’s Clean Development Mechanism. That’s 14 percent more than it initially estimated and would have earned it as much as as much as 768 million euros ($992 million) over the period, UN data show.

The CDM awards carbon credits, known as CERs, to installations in developing countries that reduce climate pollution compared with a business-as-usual scenario. Projects can sell these offsets to buyers in mandatory cap-and-trade markets such as Europe’s system, which use the credits to cover emissions that cost more to reduce. Each CER represents one metric ton of carbon dioxide.

The so-called decomposition plant destroys nitrous oxide, a greenhouse gas 310 times more powerful than carbon dioxide, by burning it. It therefore earns 310 CERs for each ton of removed nitrous oxide, a by-product of making adipic acid, a raw material for nylon. Cecile Fages, a spokeswoman in Paris for Solvay Energy Services, wasn’t immediately able to comment when reached by telephone.

Factories and power stations in the European Union’s emissions market surrendered 62 million of the offsets generated by the Ulsan plant to meet caps set by the European Commission, the market regulator, from 2008 to 2012, according to EU data. The EU banned the use of nitrous oxide CERs from adipic acid production, as well as offsets that represent cuts in hydrofluorocarbon-23 emissions, from 2013.

Running Costs

The unit may have cost in excess of 6.5 million euros to build, according to documents filed by Solvay on the UN Framework Convention on Climate Change’s website. The annual fixed costs amount to about 230,000 euros a year, the documents show. No figures for variable costs were given.

At an average price of 10.63 euros a ton for front-year CERs from 2008 to 2012, the project may have earned as much as 776 million euros from selling its offsets, according to calculations by Bloomberg. CERs for December were unchanged at 40 euro cents a ton on London’s ICE Futures Europe exchange at 2:30 p.m. They’ve plunged 90 percent in the last year.

To contact the reporter on this story: Alessandro Vitelli in London at avitelli1@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net

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