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UN Proposes Changes to Hydrofluorocarbon-Reduction Projects

May 16 (Bloomberg) -- A United Nations-overseen panel that helps set the rules of the world’s second-biggest carbon market proposed to change how regulators determine the number of credits awarded to plants that cut hydrofluorocarbon-23.

Regulators are clamping down on projects that reduce emissions of HFC-23, which has a global-warming potential 11,700 times more powerful than carbon dioxide, and the European Union earlier this year banned the use of credits linked to the industrial gas in its emissions-trading system from 2013.

Proposed rules for projects that generate credits for cutting hydrofluorocarbons under the UN Clean Development Mechanism may change the “cap on the baseline HFC-23 generation rate, i.e. the amount of HFC-23 formed per amount of HCFC-22 produced,” according to the minutes of the Methodologies Panel meeting published on the UN Framework Convention on Climate Change website over the weekend.

HFC-23 is a byproduct of HCFC-22 used in air-conditioning and refrigeration. The panel continued to consider a request for clarification of the rules, it said separately.

UN emissions credits for delivery in December fell 0.2 percent to 12.66 euros a metric ton as of 10:31 a.m. on the ICE Futures Europe exchange in London. EU carbon allowances for December traded 0.1 percent up at 16.73 euros.

Placed on Hold

At a meeting ended on Nov. 26 in Cancun, Mexico, the CDM executive board agreed to “place on hold and revise” the methodology of awarding credits for cutting the industrial gas amid allegations of misuse.

The UN carbon program allows investors to earn carbon credits, or Certified Emission Reduction units, for projects that cut emissions in developing nations. The 19 projects cutting HFC-23 under the CDM program are located mainly in China and India, according to UN data.

The UN emission-reduction credits, also known as offsets, may be used by governments for compliance with their greenhouse-gas reduction targets under the Kyoto Protocol. They can also be used by more than 11,000 power plants and factories in the EU carbon system as a cheaper way to comply with pollution quotas.

The EU banned credits tied to HFC-23 and some nitrous oxide projects in January, saying they have generated “exorbitant” returns and created a “perverse incentive” for investors, undermining the market’s integrity. The EU and environmental lobbyists including CDM Watch have said some plants may be increasing HCFC-22 output simply to generate credits for controlling HFC-23 discharges.

To contact the reporter on this story: Mathew Carr in London at m.carr@bloomberg.net; Ewa Krukowska in Brussels at ekrukowska@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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