Five Things You Should Know About Ozone Depleting Substances in California's Cap-and-trade Program

Five Things You Should Know About Ozone Depleting Substances in California's Cap-and-trade Program

Gary Gero

President, Climate Action Reserve

The Huffington Post- Green The Blog

Posted: 12/04/2012 1:58 pm

California's cap-and-trade program incorporates the use of carbon offsets generated from the destruction of ozone depleting substances (ODS) to help the state meet its goals for reducing greenhouse gas emissions. While you may not be familiar with the term ozone depleting substances, chances are that these substances can be found in your home and business. ODS are used in a wide variety of commercial and residential refrigerators, air conditioning units, and building insulation.

ODS destroy the stratospheric ozone layer when released into the atmosphere. In addition to their potency in burning a hole in the earth's protective ozone layer, certain ODS are also significant greenhouse gases with high global warming potential (GWP), meaning they are extremely potent at trapping heat in the atmosphere. The GWP of ODS can be several hundred to several thousand times more potent than carbon dioxide.

While many ODS have been banned from production, they have not been banned from being reused in older equipment after being reclaimed. Leakage of existing ODS during reclamation and in older equipment is both a serious climate concern and a serious threat to the earth's protective ozone layer.

California's standard -- or protocol -- for ODS offsets provides a rigorous methodology and a financial incentive for the destruction of ODS gases, specifically certain chlorofluorocarbons and hydrochlorofluorocarbons. Here are five things you should know about ODS in California's cap-and-trade program:

1. These gases are not required by law to be destroyed and, therefore, are often reused.

In 1987, global leaders came together to address the thinning of the ozone layer in the earth's stratosphere and adopted the Montreal Protocol on Substances that Deplete the Ozone Layer, an international treaty that provides a global framework for phasing out the production of substances responsible for ozone depletion. To date, 197 nations -- almost every country in the world -- ratified the treaty to reduce and eventually eliminate the production and use of ODS. The United States ratified the treaty and incorporated the rapid production phase-out schedule for developed nations.

However, the Montreal Protocol does not require the destruction of existing stocks of ODS, and so ODS produced prior to phase-out may legally be recovered, recycled, reclaimed, and reused indefinitely in the U.S. refrigerant market until they have all leaked into the atmosphere. The destruction of ODS is not common practice in the U.S. and large quantities of existing stocks are available in old refrigeration systems, air conditioning units, building infrastructure and unused stockpiles. Reclaimed ODS are often reused to service older equipment that have high leak rates; some equipment may release ODS to the atmosphere at rates of up to 35 percent per year.

2. The ODS protocol specifically excludes newly produced gases.

The California Compliance Offset Protocol for ODS Projects and the Climate Action Reserve's U.S. ODS Project Protocol, on which it was based, only issue offset credits for the destruction of existing stockpiles of gases that are prohibited from new production under the Montreal Protocol. They specifically exclude gases that are still being produced or that are not covered by the Montreal Protocol.

In comparison, the UN's Clean Development Mechanism (CDM) offset program provides credit for the destruction of newly produced HFC-23 gases. This has created a perverse incentive to produce more HCFC-22 gas in order to destroy the HFC-23 byproduct for credit. HFC-23 is not an ozone-depleting substance and is not eligible under the California or Reserve ODS protocol. HCFC-22 coolant also is not eligible under the ODS protocols.

By only allowing ODS that have been phased out of production, California's offset program is safeguarded from gaming of the system.

3. Only gases sourced and destroyed in the U.S. at highly regulated and permitted facilities are eligible.

Under California's cap-and-trade program, the ODS must be destroyed at U.S. facilities that meet the U.S. EPA's very strict permit and operating requirements to protect the environment.

Also, California's cap-and-trade program restricts eligibility to ODS sourced from and destroyed in the U.S. Such a restriction ensures very strict and efficient quality control, monitoring and verification.

4. Strict documentation requirements are enforced.

The ODS protocol has very strict documentation requirements to demonstrate full and complete chain of custody of the ODS from point of origin to destruction (so called "cradle to grave" records). ODS projects must also provide detailed documentation of data collection, sample analyses, chemical composition, and operating procedures.

5. The destruction of ozone depleting substances has already achieved significant emissions reductions.

U.S. ODS projects registered in the Climate Action Reserve have already achieved nearly five million metric tons of carbon dioxide equivalent emissions reductions, the equivalent of taking nearly one million passenger vehicles off the road for one year. These carbon credits are eligible for conversion to early action offset credits for use in California's compliance program. So that old refrigerator you recycled through your local utility or local Sears may be playing an important role in fighting climate change. ODS chemicals from your old appliances are recovered in a safe manner at disposal facilities, and offset programs incentivize the destruction of these chemicals, preventing the gases from escaping and damaging the environment.

At an appliance recycling center, ODS is captured from old refrigerators for destruction.

Using market incentives for ODS destruction is more efficient and effective than alternatives, such as a mandate. Attempts to mandate destruction of ODS have had limited success because of difficulties in monitoring widely dispersed collection activities and difficulties enforcing penalties for illegal releases. With many millions of refrigerators, buildings, and other equipment containing ODS, monitoring disposal of the refrigerants and foam blowing agents is difficult. By incentivizing their destruction, California is ensuring the permanent removal of these destructive gases from continued leakage, thereby protecting the ozone layer and helping address global climate change.

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A-GAS INTERNATIONAL EXPANDS ITS PRESENCE IN AMERICA

LEADING REFRIGERANTS SUPPLIER A-GAS INTERNATIONAL COMPLETES STRATEGIC ACQUISITION OF KEY INDEPENDENT US REFRIGERANTS SUPPLIER AND DISTRIBUTOR, COOLGAS

Bristol-based A-Gas International (or“the Group”), one of the world’s largest independent suppliers of refrigerants, associated environmental services, and speciality gases and chemicals, has completed the acquisition of Houston, Texas based Coolgas Inc. (“Coolgas”), a leading independent supplier and distributor of refrigerants to the US market. The terms of the transaction were not disclosed.

The transaction represents the fifth strategic acquisition completed by A-Gas so far in 2012, and forms part of the Group’s acquisitive growth strategy which is being executed both in the UK and internationally. The enlarged group will have a turnover of c. £130m and 237 employees.

Founded in 1994 by Jesse Combs, Coolgas has grown over the past 18 years to become one of the leading independent distributors of refrigerants in the US. Coolgas’ “refrigerants made simple” philosophy reflects the focus on customer service that has enabled it to grow first to a regional and then to a national player. Coolgas has recently commissioned a new refrigerant storage and packaging facility in Houston and has distribution centres in California, Utah, Arizona, Indiana, Michigan, Maryland and Georgia ensuring that Coolgas is close to its customers wherever they are located.

In recent years Coolgas has also become an EPA registered reclaimer of refrigerants and a project developer for the generation of carbon offsets on the California Climate Action Reserve exchange. These capabilities enable Coolgas to manage the lifecycle of Ozone Depleting Substances (ODS) and substances with high Global Warming Potential (GWP) to safeguard the environment.

The acquisition builds on A-Gas’acquisition of Ohio based refrigerant reclaimer and halocarbon management specialist RemTec International in July 2012. Coolgas provides a strong strategic fit, bringing a strong brand and complementary footprint that will accelerate refrigerants sales growth. Further the reclaim and carbon credits businesses extend A-Gas’ existing operations in the US Environmental Services market which is already well established in the UK and Europe.

The acquisition of Coolgas follows on from the successful acquisitions not only of RemTec International in July 2012 but also of Australian based Technochem in March 2012 and SA Rural in May 2012, and UK based A-Zone Technologies in April 2012.

Commenting on the acquisition:

John Rutley, Executive Chairman and founder of A-Gas International said:
Jesse Combs and his management team have built a great business in the US refrigerant sector and we are delighted to add it to our rapidly expanding presence in this important market. The fit with our recently acquired business, RemTec, is perfect and allows us to offer a full range of products and services to our customers in the world’s largest refrigerant market.

Jon Masters, Regional Managing Director of A-Gas International said:

The acquisition of Coolgas will significantly strengthen our position as the leading independent global supplier of refrigerants at a time when regulatory changes are providing increasing opportunities for reclamation and recycling of used refrigerants using our market leading technology developed in the UK. We look forward to supporting the Coolgas management team and workforce in continuing to provide outstanding service to its customers.

Jesse Combs, CEO of Coolgas said:

I feel honoured that A-Gas saw Coolgas as a strategic fit and entry point into the US refrigerants’ distribution business. Our team of professionals have a customer service mind-set that I believe sets Coolgas apart from the rest of the industry. I have the upmost confidence that the A-Gas team will support and grow upon our "refrigerants made simple" philosophy for many years to come.

About A-Gas International

A-Gas is an international group of companies with headquarters in Bristol, UK. A-Gas is a market leader in the supply of refrigerants within its core territories in the U.K., South Africa, and Australia, and has state of the art storage, blending, packaging and reclamation facilities in Bristol, Cape Town, and Melbourne. The company also has marketing and distribution centres in Singapore, Thailand, China and Mexico. In the US, A-Gas has a Performance Chemicals business located in Doylestown, Pennsylvania; RemTec International, a refrigerant reclaimer and halocarbon management specialist located in Bowling Green, Ohio; and now Coolgas, headquartered in Houston, Texas. For more information, visit www.agas.com

About Coolgas

Coolgas Inc. was started in 1994 as a distributor of refrigerant gases. Through a continual focus on customer service embodied by its “refrigerants made simple” philosophy it has gained customers across the United States and grown to become one of the leading independent distributors of refrigerants. Coolgas supplies a full product range from essential use CFCs through to the most recent HFC blends. Coolgas also supplies in a wide variety of formats from the smallest auto aftermarket disposable cans through to bulk tankers for industrial customers. Coolgas is an EPA approved refrigerant reclaimer. The Coolgas, Inc. headquarters are located 40 miles north of Houston, Texas. For more information visit www.coolgas.com

California carbon twice as expensive as European

The cost of carbon in California has risen sharply while the equivalent in the European Emissions Trading System has so far gained little from yesterday’s long-awaited reform proposals

London, 26 July 2012 – A reduction in regulatory uncertainty in California, and concern about a nuclear power outage, have helped to push the price of a carbon allowance in the US’ most populous state to more than double that in the much longer-established European Union Emissions Trading System.

The value of a California Carbon Allowance (CCA) for delivery in December 2012 closed at $19.50 per metric ton of CO2 equivalent (EUR16.04/tCO2) on 24 July, the highest closing price of the year so far. The price for European Union Allowances (EUAs) for delivery in December 2012 closed at EUR7.20/tCO2 on the same day.

The much higher price in California may be surprising to Europeans, given perceptions about American reluctance to take action on climate change. Ironically, the California scheme was almost derailed earlier this year by legal action taken by an environmental action group (the Association of Irritated Residents) who insisted that the scheme was not strict enough.

The price of EUAs has remained low despite the European Commission’s release yesterday of its proposal for changes to auctioning volumes in Phase III of the EU ETS, which begins in 2013. These changes, if approved by both Parliament and the Council, would delay some of the auctioning volume originally intended for the early years of Phase III, into the later years. The changes were proposed by the European Commission in response to widespread criticism that the price in the EU ETS is too low to promote the necessary investments in clean energy.

In the long term, Bloomberg New Energy Finance expects prices in both the Californian and EU ETS to rise significantly, since the emission reduction targets in both parts of the world for the period beyond 2020 are likely to continue to strengthen. At the moment the firm’s base case forecast for the spot price of an allowance in 2020 in both markets is the same, at EUR45/tCO2 ($55/tCO2). The fact that the forecasts are the same is purely coincidental and belies significant structural differences in the two markets; the EU ETS has access to the Kyoto market for international credits whereas California does not; and the largest sector in the EU ETS is the power sector while transportation is the largest emitter in the California market.

Matthew Cowie, head of carbon market research at Bloomberg New Energy Finance, commented, “While it appears that Europe has the political will to give the EU ETS more teeth in the long term, the process of fixing the problems continues to suffer delays. A month ago most market participants thought that changes to the Auctioning Regulation could be in place by the end of 2012, but most commentators now expect that this will take well into 2013 to accomplish. This market needs both ambition and structural stability in order to regain its lost importance.”

Michel Di Capua, head of North American research at Bloomberg New Energy Finance, commented, “After several failed attempts to introduce cap-and-trade at the national level, there’s a widespread belief that carbon markets are dead in North America. Not so. We are on the verge of seeing the emergence of a meaningful tradable market that over the long run will transform California’s power, industrial, and transport sectors. The business community should take note; this market will impact some of the country’s largest utilities and some of the world’s biggest oil and gas players, among others.”

Futures contracts for the California market have been trading since 2011. Its underlying spot market is due to begin in 2013. The EU ETS saw the first futures trading in 2003, and the start of spot trading in 2005.

For further information:
Matthew Cowie
Bloomberg New Energy Finance
+44 20 3216 4780
mcowie2@bloomberg.net

 

Carbon Credits Provide Cash Incentives and Environmental Benefits for the Recovery and Destruction of CFCs

Used CFCs found in any condition, or mixed with other refrigerants can be turned into cash with the additional benefit of protecting the environment!    

The California Climate Action Reserve (CAR) has formally released a Destruction of Ozone Depleting Substances (ODS) Protocol, that provides a standardized approach for quantifying and monitoring Green House Gas (GHG) reductions, from projects that destroy ODS with high global warming potential. Specifically, the CAR Protocol version 2.0 provides incentives for the destruction of R-11, R-12, R-13, R-113, R-114 and R-115, with the caveat that these gases were previously used in refrigerant applications, or are from virgin stockpiles. Other CFCs recovered from foam building insulation and from appliance insulation are also eligible. The protocol is available at the following link: http://www.climateactionreserve.org/how/protocols/adopted/ods/current/

“The current market value of these offset credits not only covers all the costs of destruction, but also provides cash incentives to contractors and end users who are willing to recover these refrigerants and send them to an approved recycling facility that is recognized by CAR as a site that can convert these CFCs to verified carbon credits. “

For more information contact RemTec today or visit our website www.remtec.net

From the Carbon-California Desk

09.13.12
Study Highlights California Carbon Offset Supply Shortage

American Carbon Registry releases offset supply analysis for California carbon market, projecting 29% shortage by 2015, 67% shortage by 2020.

A report released today by the American Carbon Registry (ACR) points to a significant shortage of offsets in the California carbon market. Offset demand in a California cap-and-trade market is expected to reach just over 200 million metric tons co2 equivalent (MMTCO2e) by 2020. To date, the regulators in California have only adopted four protocols for compliance use – US ODS, Livestock Methane, Forestry and Urban Forestry.

Based on the four Compliance and Early Action Protocols adopted, the analysis projects a shortage of 29%, or 7.6 MMTCO2e, in the first compliance period (CP1) rising to 67%, or 134 MMTCO2e, in the third compliance period (CP3). As is currently the case in the pre-compliance market, US ODS and Forestry projects are forecasted to provide the majority of supply to the market.

Forecast Cumulative ARB Offset Supply vs. Potential Offset Demand (2012-2020)*

The analysis looked at currently adopted protocols and considered the addition of the following protocols: Coal Mine Methane (CMM), Low-bleed Pneumatic Valves, Rice Management and Fertilizer Management. Despite their inclusion in the ACR study, ARB made statements in June indicating they are no longer considering pneumatics as an eligible project type.

ACR anticipates a majority of the 7.6 MMTCO2e short in CP1 would addressed by the adoption Pneumatics (5 MMTCO2e). Based on ARB's statements, these credits will not be available for compliance use, and credits from CMM and Rice Management protocols will still be insufficient to make up for the shortfall. If pneumatics are in fact "off the table" for California, compliance offset supply appears to remain short in CP1, and CMM early action is the only supply option with enough potential capacity to address this shortfall.

If the three aforementioned protocols were adopted in 2013 by California, the report states it will reduce the 2020 market short from 134 MMTCO2e to 70 MMTCO2e. Discounting for lack of supply from pneumatic projects, this shortfall is more likely to be 96 MMTOCO2e by 2020, and even larger amount of offsets needed to satisfy demand.

Forecast Offset Supply: Current Compliance Protocols + Rice, CMM, Pneumatics, Fertilizer*

The analysis does not model the potential for credits from Reduced Emissions from Deforestation and Forest Degradation (REDD). Under the regulation, California has stated they will allow regulated entities to surrender credits from countries with high rates of deforestation, i.e. specific states within Brazil, Indonesia and Mexico. The credits are generated from protecting forested lands from deforestation, one of the largest sources (20-25%) of greenhouse gas emissions, globally.

Credits generated from nested REDD projects are expected to be large. However, California has restricted the quantity the market can absorb to 25% (of the 8% limit) each compliance period, or just over 50 MMTCO2e (2013-2020).

ARB can also consider a host of other protocols including Mexican-based ODS, N2O abatement, Organic Waste Digestion, amongst others, which ACR did not include in their analysis.
If you have any questions regarding offsets, or the California carbon market in general, please contact Evolution Markets' US Carbon Markets team at: +1 415.963.9137 or +1 914.323.0265.
(*: source: "Compliance Offset Supply Forecast", September 2012, Winrock International, American Carbon Registry)

Global Expansion Continues With US Deal

The Bristol Post
Michael Ribbeck
August 8 2012

A-Gas buys disposal specialist

A company based in Portishead which specializes in supplying gases used in refrigeration has just completed its fourth takeover this year.

A-Gas has gone on its acquisition spree as part of a strategy to expand into international markets.

The firm is already one of the world's largest suppliers of refrigerated gases, environmental services and specialty gases and chemicals.

The company, which also has offices in Bristol, has bough United States based RemTec International in its latest deal. The firm specializes in disposing of harmful gases.

The value of the deal was not made public but it took place with support from private equity specialist LDC, which invested in the firm in April 2011.

RemTec was set up in 1986 and provides products and services inolved in managing Ozone Depleting Substances (ODS) and substances high in Global Warming Potential (GWP) across the world. 

As part of the expansion plan A-Gas has now got a presence in the Middle East, China, Australia and India as well as Latin America.

RemTec has contracts with organizations all over the world to remove, recycle and remarket halocarbons.

The acquisition of RemTec follows on from similar acquisitions of Australian-based Technochem in March and SA Rural in May, and UK based A-Zone Technologies in April.

John Rutley, chairman of A-Gas International, said, "The acquisition of RemTec is another great example of our ambition to grow the business on a global scale." 

"RemTec brings a market leadership position in Halons and a strong platform for growth in refrigerants; we believe that there is real scope to build further upon RemTec's success to date in North America, whilst also driving value across the enlarged group."

Ian Podmore of LDC added: "2012 has been an exceptionally busy year to date for A-Gas. RemTec is the fourth strategic acquisition completed by the business this year and not only strengthens their existing position in the global refrigerant market but also gives the business real scale within the USA."

"The transaction brings many strategic benefits to A-Gas and is part of an agreed strategy to rapidly expand and build the business both through organic investment and bolt-on acquisitions. We will continue to work closely with the team to drive their amitious growth plans."

Yann Souillard, managing director of LDC South Region, added: "LDC's South team has worked in close conjunction with the management team to support their ambitious 'buy and build' growth strategy. As part of our investment commitment, LDC works closely with our investment portfolio to provide expertise and follow-on funding when the right target companies become available."

West Gas Firm Expands With Buying Spress

Western Daily Press
9 August 2012

A company based in Portishead which specializes in supplying gases used in refrigeration has just completed its fourth takeover this year.

A-Gas has gone on its acquisition spree as part of a strategy to expand into international markets.

The firm is already one of the world's largest suppliers of refrigerated gases, environmental services and specialty gases and chemicals.

The company, which also has offices in Bristol, has bough United States based RemTec International in its latest deal. The firm specializes in disposing of harmful gases.

The value of the deal was not made public but it took place with support from private equity specialist LDC, which invested in the firm in April 2011.

RemTec was set up in 1986 and provides products and services inolved in managing Ozone Depleting Substances (ODS) and substances high in Global Warming Potential (GWP) across the world. 

As part of the expansion plan A-Gas has now got a presence in the Middle East, China, Australia and India as well as Latin America.

RemTec has contracts with organizations all over the world to remove, recycle and remarket halocarbons.

The acquisition of RemTec follows on from similar acquisitions of Australian-based Technochem in March and SA Rural in May, and UK based A-Zone Technologies in April.

John Rutley, chairman of A-Gas International, said, "The acquisition of RemTec is another great example of our ambition to grow the business on a global scale."

Incentive to Slow Climate Change Drives Output of Harmful Gases

By ELISABETH ROSENTHAL and ANDREW W. LEHREN

Published: August 09, 2012

Correction Appended

RANJIT NAGAR, India - When the United Nations wanted to help slow climate change, it established what seemed a sensible system.

Greenhouse gases were rated based on their power to warm the atmosphere. The more dangerous the gas, the more that manufacturers in developing nations would be compensated as they reduced their emissions.

But where the United Nations envisioned environmental reform, some manufacturers of gases used in air-conditioning and refrigeration saw a lucrative business opportunity.

They quickly figured out that they could earn one carbon credit by eliminating one ton of carbon dioxide, but could earn more than 11,000 credits by simply destroying a ton of an obscure waste gas normally released in the manufacturing of a widely used coolant gas. That is because that byproduct has a huge global warming effect. The credits could be sold on international markets, earning tens of millions of dollars a year.

That incentive has driven plants in the developing world not only to increase production of the coolant gas but also to keep it high - a huge problem because the coolant itself contributes to global warming and depletes the ozone layer. That coolant gas is being phased out under a global treaty, but the effort has been a struggle.

So since 2005 the 19 plants receiving the waste gas payments have profited handsomely from an unlikely business: churning out more harmful coolant gas so they can be paid to destroy its waste byproduct. The high output keeps the prices of the coolant gas irresistibly low, discouraging air-conditioning companies from switching to less-damaging alternative gases. That means, critics say, that United Nations subsidies intended to improve the environment are instead creating their own damage.

The United Nations and the European Union, through new rules and an outright ban, are trying to undo this unintended bonanza. But the lucrative incentive has become so entrenched that efforts to roll it back are proving tricky, even risky.

China and India, where most of the 19 factories are, have been resisting mightily. The manufacturers have grown accustomed to an income stream that in some years accounted for half their profits. The windfall has enhanced their power and influence. As a result, many environmental experts fear that if manufacturers are not paid to destroy the waste gas, they will simply resume releasing it into the atmosphere.

A battle is brewing.

Disgusted with the payments, the European Union has announced that as of next year it will no longer accept the so-called waste gas credits from companies in its carbon trading system - by far the largest in the world - essentially declaring them counterfeit currency. That is expected to erode their value, but no one is sure by how much.

"Consumers in Europe want to know that if they're paying for carbon credits, they will have good environmental effects - and these don't," Connie Hedegaard, the European commissioner for climate action, said in an interview.

Likewise, the United Nations is reducing the number of credits the coolant companies can collect in future contracts. But critics say the revised payment schedule is still excessive and will have little immediate effect, since the subsidy is governed by long-term contracts, many of which do not expire for years.

Even raising the possibility of trimming future payments "was politically hard," said Martin Hession, the immediate past chairman of the United Nations Clean Development Mechanism's executive board, which awards the credits. China and India both have representatives on the panel, and the new chairman, Maosheng Duan, is Chinese.

Carbon trading has become so essential to companies like Gujarat Fluorochemicals Limited, which owns a coolant plant in this remote corner of Gujarat State in northwest India, that carbon credits are listed as a business on the company Web site. Each plant has probably earned, on average, $20 million to $40 million a year from simply destroying waste gas, says David Hanrahan, the technical director of IDEAcarbon, a leading carbon market consulting firm. He says the income is "largely pure profit."

And each plant expects to be paid. Some Chinese producers have said that if the payments were to end, they would vent gas skyward. Such releases are illegal in most developed countries, but still permissible in China and India.

As the United Nations became involved in efforts to curb climate change in the last 20 years, it relied on a scientific formula: Carbon dioxide, the most prevalent warming gas, released by smokestacks and vehicles, is given a value of 1. Other industrial gases are assigned values relative to that, based on their warming effect and how long they linger. Methane is valued at 21, nitrous oxide at 310. HFC-23, the waste gas produced making the world's most common coolant - which is known as HCFC-22 - is near the top of the list, at 11,700.

The United Nations used the values to calibrate exchange rates when it began issuing carbon credits in 2005 under the Clean Development Mechanism. That system grants companies that reduce emissions in the developing world carbon credits, which they are then free to sell on global trading markets. Buyers of the credits include power plants that need to offset emissions that exceed European limits, countries buying offsets to comply with the Kyoto Protocol - an international environmental treaty - and some environmentally conscious companies that voluntarily offset their carbon footprint.

Since the United Nations program began, 46 percent of all credits have been awarded to the 19 coolant factories, in Argentina, China, India, Mexico and South Korea. Two Russian plants receive carbon credits for destroying HFC-23 under a related United Nations program.

"I was a climate negotiator, and no one had this in mind," said David Doniger of the Natural Resources Defense Council. "It turns out you get nearly 100 times more from credits than it costs to do it. It turned the economics of the business on its head."

Destroying the waste gas is cheap and simple, but it is hard to know exactly how much any one company has earned from doing so, since the market price for carbon credits has varied considerably with demand - from about $9 to nearly $40 per credit - and they can be sold at a discount through futures contracts.

The production of coolants was so driven by the lure of carbon credits for waste gas that in the first few years more than half of the plants operated only until they had produced the maximum amount of gas eligible for the carbon credit subsidy, then shut down until the next year, United Nations reports said. The plants also used inefficient manufacturing processes to generate as much waste gas as possible, said Samuel LaBudde of the Environmental Investigation Agency, an organization based in Washington that has long spearheaded a campaign against what he called "an incredibly perverse subsidy."

Michael Wara, a law professor at Stanford University, has calculated that in years when carbon credits were trading at high prices and coolant was dirt-cheap because of the oversupply, companies were earning nearly twice as much from the credits as from producing the coolant itself.

The United Nations, recognizing the temptation for companies to jump into the lucrative business, has refused since 2007 to award carbon credits to any new factories destroying the waste gas. And last November, it announced that in contract renewals, factories could claim credits for waste gas equivalent only to 1 percent of their coolant production, down from 3 percent. The United Nations believes that eliminates the incentive to overproduce, said Mr. Hession, the former Clean Development Mechanism board chairman.

Even with these adjustments, credits for destroying waste gas this year remain the most common type in the United Nations system, which rewards companies for reducing all types of warming emissions. Eighteen percent of credits in 2012 will go to the 19 coolant plants, compared with 12 percent to 2,372 wind power plants and 0.2 percent for 312 solar projects for the carbon dioxide emissions avoided by the clean energy they produce.

In India, coolant plants received about half of the United Nations carbon credits awarded to companies in that country, for destroying their waste gas, during the system's first five years. They accrued the power and money to fight efforts to roll back the subsidy.

Compared with Indian representatives, Chinese diplomats have shown greater willingness at international meetings to consider altering the subsidy for waste gas credits, said Stephen O. Andersen, a former United States Environmental Protection Agency official who is now with the Institute for Governance and Sustainable Development in Washington. That is because China has a more centrally controlled economy and because it is developing an industry based on newer coolants. "It's easier for them to put the national interest before the interest of one manufacturing sector," he said.

A bigger question is just how much the European Union's decision to disallow, as of next year, the waste gas credits in its immense carbon trading system will decrease their value.

Banks and companies holding such credits have been rushing to cash them in or sell them. And the potential devaluation of the carbon credits has an impact in other industrialized nations, since the carbon credit projects involve foreign sponsors and investors, who sometimes received carbon credits in exchange for services or financing.

The Gujarat project was financed by Rabobank of the Netherlands and the Sumitomo Corporation of Japan.

A coolant factory in Monterrey, Mexico, that receives carbon credits is 49 percent owned by Honeywell. Goldman Sachs bought many of its carbon credits.

Such credits are likely to have some continued value, because they can be used in other environmental programs that allow their use, like voluntary ones through which companies offset the emissions generated by having a conference or travelers opt to pay a fee to offset the emissions from an airplane flight.

Mr. LaBudde, of the Environmental Investigation Agency, who has long campaigned against the subsidy, said he hoped that no one would buy these "toxic" credits that "have no place in carbon markets" and that they would quickly disappear. In its latest annual report, Gujarat Fluorochemicals acknowledged that its carbon credits "may not have a significant market" starting next year because European companies have previously been their primary buyers.

Mr. Hanrahan, of IDEAcarbon, said that the credits could, at the very least, be sold at a low price to traders who see the possibility for marginal profit in a way similar to the market for junk bonds. Even if all the proposals to make the carbon trade far less valuable succeeded, the 19 factories certified to generate carbon credits by destroying the waste gas could earn $1 billion from that business over the next eight years, according to projections by IDEAcarbon.

And even as the economics shift, one big environmental question remains: Without some form of inducement, will companies like Gujarat Fluorochemicals continue to destroy the waste gas HFC-23? Already, a small number of coolant factories in China that did not qualify for the United Nations carbon credits freely vent this dangerous chemical. And atmospheric levels are rapidly rising.

Elisabeth Rosenthal reported from Gujarat State, India, and Andrew W. Lehren from New York.

Executive Director of WCI, Inc. Steps Down

Executive Director of WCI, Inc. Steps Down

Operations, programs to continue without interruption during search for a replacement

Sacramento—The Board of Directors of Western Climate Initiative, Inc. announced today that WCI, Inc. Executive Director Anita M. Burke has stepped down for personal reasons.

Burke was hired in March to establish and coordinate technical and administrative support for the emissions trading programs of WCI, Inc.'s participating jurisdictions, including the allowance auctions, market monitoring and tracking of carbon allowances and offsets.

A search for her replacement is underway.  In the meantime, the development of support and administrative mechanisms for the emissions trading program will continue without interruption.

“Anita launched WCI, Inc.’s operations and initiated work on key systems to support the emissions trading programs,” said WCI, Inc. Chair James N. Goldstene.  “We will continue to develop and refine coordinated support services as we search for her replacement.”

WCI, Inc. was formed in November 2011 as a non-profit corporation to provide coordinated administrative and technical services in support of state and provincial greenhouse gas emissions trading programs.

For more information, visit www.wci-inc.org
Contact: Deborah Hoffman (916) 324-9670 dhoffman@calepa.ca.gov