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BRUSSELS, Jun 2, 2011 (IPS) - For years, European governments and corporations have made use of a loophole in the Kyoto protocol on climate change to make exorbitant profits. According to some sources, this lucrative scheme has caused more pollution than ever before.

The Kyoto protocol allows European companies to ‘offset’ their excess emissions of greenhouse gases by buying emissions reductions in developing nations. This provision is called the Clean Development Mechanism (CDM). The eligibility of the overseas projects and the issuance of emission credits - which in this case are called Certified Emission Reductions (CERs) - are controlled by a council at the U.N., the CDM Executive Board.

In June 2010, two environmental NGOs - CDM Watch, based in Bonn, and Environmental Investigation Agency (EIA), with offices in Washington, DC and London - discovered that European governments and corporations were grossly misusing the CDM. Fifty-nine percent of all CERs originated from the same 19 projects, though a total of 2,800 projects were registered. These 19 projects all produced HCFC-22, a refrigerant gas that is banned in the U.S. and Europe under the Montreal Protocol on Substances That Deplete the Ozone Layer because of its ozone-depleting properties. In developing countries the gas must be phased out by 2030.

HCFC-22 is also a ‘super green house gas’ that is 1,810 times more potent than carbon dioxide. Furthermore, HFC-23, the unwanted by-product of the manufacture of HCFC-22, is 11,700 times more harmful than carbon dioxide.

When the producers of the refrigerant choose to burn the by-product HFC-23 instead of venting it into the air, they are eligible for heaps of credits under the CDM. Burning one tonne of HFC-23 would bring in 11,700 CERs or emission credits for the plant burning the gas.

It turned out this was a very lucrative business. Burning the equivalent of one tonne of carbon dioxide only cost 25 U.S. cents while the credits could be sold on the European market for not less than 19 dollars.

These projects soon attracted Western investment banks that wanted to share in the profits: JP Morgan Chase, Citigroup, Goldman Sachs, Rabobank and Fortis. Next to these banks, the Italian, Dutch and British governments appear several times on the list of investors. Large energy companies including E.ON (Germany), Nuon (Netherlands), RWE (Germany), Enel (Italy) and Electrabel (Belgium) are also involved as project participants. MORE

Just weeks before the 2010 U.N. COP16 climate talks in Cancún, Europe’s climate Commissioner Connie Hedegaard proposed a ban on all HFC-credits in the European system of emissions trading (ETS) to take effect Jan. 1, 2013. On that date, the second phase of the ETS is due to end, after which new rules could apply.

Industry lobby groups and business organisations resisted the ban. Brussels-based NGOCorporate Europe Observatory made use of Freedom of Information Regulations here to obtain documents and reconstructed the full story.

BusinessEurope is the most influential lobby group in Brussels, representing 40 industrial and employers’ federations from 34 European countries. In October 2010, BusinessEurope’s Director- General Philippe de Buck sent a letter to Hedegaard and Commissioner of Industry and Entrepreneurship Antonio Tajani in which he spells out his opposition to limiting the use of credits from the CDM.

BusinessEurope also made use of a new employee, who had just finished three years of work at the European Commission of Enterprise and Industry. In an email to his former colleagues at the Commission, this employee refers to a recent goodbye drink and expresses his wish to keep on working together in his new lobbying function. In an attachment, he forwarded the position paper of BusinessEurope - which opposes the ban.
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