Carbon Market Watch

For fair and effective climate protection.

Board fails to address carbon leakage from adipic acid projects (Newsletter #3)

05 Sep 2009

In a bold move, the CDM Executive Board overruled at its last meeting the recommendation by the Meth Panel on how „existing capacity“ should be interpreted for projects that reduce N2O emissions from adipic acid production. This decision will result in continued issuance of CERs that do not present real emission reductions, given the significant carbon leakage that is ongoing in this sector.

According to data available to CDM Watch, the global adipic acid production shifted from plants that reduce the N2O without the CDM (in industrialised countries and in Singapur) to plants that use the CDM to mitigate the N2O. The underlying methodology aimed to prevent such carbon leakage by limiting it to production capacity installed by the end of 2004. However, this provision was not effective: project participants and DOEs misused the vague language and established artificial production capacities that were never achieved by the plants in their long operation history. Based on a request for clarification (CLA0148), the Meth Panel recommended to interpret existing production consistent with other methodologies, such as for HFC-23 destruction, as the maximum production during the most recent three years. However, the Board overruled the recommendation by the Meth Panel and allowed the project developers to get CERs based on a hypothetical historical production level. Given the ongoing carbon leakage and the strong financial incentives from CERs, this decisions will result in the issuance of CERs for nothing else than a shift of GHG emissions. Thumbs down.