Industrial Gases

Some industrial gases have very high Global Warming Potentials (GWP). The destruction of these gases is therefore a very effective way to reduce GHGs. Yet industrial gas offset projects are controversial because although they are the cheapest to conduct and generate large numbers of offsets, they do not contribute to the development of a low-carbon economy and deliver few additional environmental and social benefits. Few disagree that high-GWP industrial gases should either be destroyed or not produced in the first place, but the offset market does not appear to be the best way to reduce these emissions. Some reports have indicated that the creation of an offset market for HFC-23 gases has produced perverse incentives in China and India to start building new HCFC-22 facilities to increase revenue from offsets. (HFC-23 is a byproduct of HCFC-22 manufacturing). Many balk at the idea that heavily polluting industries such as these should be rewarded for the destruction of gases that should not have been produced in the first place. Furthermore, some research has shown that establishing an international fund to finance the capture and phasing out of HCFCs (via the World Bank, for example) would be much more cost-effective than reducing these emissions through the offset market (Wara, 2007).

Furthermore, although industrial gas projects can generate large emission reductions, these projects are high-tech end-of-the-pipe applications with limited employment and local environmental benefits. To counteract some of this criticism and to support sustainable development initiatives, some project developers have chosen to invest a portion of their gains into local schools, health care systems, etc.

Current CDM rules prohibit new capacity at HCFC-22 plants from earning carbon credits, but the issue will be reconsidered at a later date. A range of different solutions have been proposed. These include, among others, continuing the ban on including HFC-23 in new HCFC-22 plants, and a tax on carbon credits generated by newer refrigerant plants, the proceeds of which would be channeled into a clean technology fund to invest in renewable technologies. The exclusion of new HFC facilities from the CDM market might have the unanticipated effect of creating a large supply of these offsets in the voluntary market. New HFC-producing facilities, which are no longer eligible under CDM, could potentially flood the VER market with a large supply of cheap offsets. Because of these controversies, some standards exclude industrial gas projects altogether. The Gold Standard does not accept any industrial gas projects. Of those standards that accept all projects types, VER+ excludes all HFC projects, while the VCS excludes HFC-23 destruction credits from new HCFC-22 plants.