Dear Graeme, dear Will, I think the story of HFCs is a fascinating example of what markets can and cannot do and I thus would like to take the opportunity to raise a couple of points:
The facts (all from the UNEP Riso pipeline February 2010): * As of February 2010 there are 21 registered HFC projects, they thus make up 0.4% of all registered projects. 11 are in China, 8 in India. There is one more project in the pipeline, out of 2690. * The expected CERs will make up about 16,8% of all CERs that will be issued by 2012. * 202.096.000 CERs have been issued so far for 17 HFC projects out of 37.2352.000 CERs * Most projects entered the pipeline in 2005 and 2006. Two entered in 2007, three in 2008 and none since. I think there is complete consensus on the fact that with rather small investments (as stated by Will, Wara argues that the installations did not cost more than 100.000 million US$) in very few projects (21) huge financial benefits were made (if you take a very modest CER price of 10 US$ per CER, generated income is about 2 billion US$...) but is this ³good² or ³bad²? >From a purely financial market perspective one could argue that HFC projects were great as they allowed the market to mature rather early as lots of liquidity was provided but I think we all know by now that liquidity per se is maybe not so good after all, so I am not taking that road any further... As Graeme pointed out some observers fear that these projects are so lucrative that it might make sense that you build a factory only to generate CERs. Although the danger of perverse incentives is given, we simply do not have any proof that this led to the building of new factories and as Will stated, the Executive Board issued a grandfathering clause stating that only existing facilities will get credits. One can thus make the argument that the EB closed a regulatory loophole... Furthermore, looking at the pipeline it becomes evident that the issue of HFC is one of the past, as we only have one more project in the pipeline. Most importantly, the CDM as a market mechanism that primarily reacts to prices completely fulfills its job if the ³low-hanging² fruits are picked. Wara¹s point that you could have done it so much cheaper is completely irrelevant, because nobody did! There were no HFC GEF projects nor did any Western government set up a fund of 100.000 million US$ to destroy HFC 22. Only when there was a demand generated through the CDM mechanism did people start doing something about it and I think we can all agree that the climate is after all better off if those HFCs are no longer entering the atmosphere. Thus, West European taxpayers paid way too much money to smart Chinese capitalists (and these projects are almost completely Chinese), but something happened! And the Chinese government taxes these projects very heavily and has publicly stated that all income generated through taxing CERs will go into a ³green² fund. Potentially, a large junk of the money could thus have a real SD impact. This does not imply that the CDM is great for initiating sustainable development per se nor that the idea of offsets or the CDM itself is beyond criticism but the CDM as a market mechanism works as it allows smart people to find very lucrative ways of how GHGs are reduced most efficiently. Finally, most of the time when the CDM is discussed in China, people only talk of HFC projects, but there are now more than 400 wind power and more than 80 Biomass energy projects and most of them entered the pipeline much later... Let¹s put our attention to these and let¹s find out whether they can provide any small input towards a low-carbon economy in China at all... Best and looking very much forward to a lively discussion... Markus -- Dr. Markus Lederer Assistant Professor Chair of International Politics Faculty of Economics and Social Sciences, University of Potsdam August-Bebel-Str. 89; 14482 Potsdam, Germany Tel: + 49 331 977 3531 Fax: + 49 331 977 3429 Skype: markus.lederer1 Email: [email protected] Web: www.uni-potsdam.de/db/fuhr/ To unsubscribe from this group, send email to gep-ed+unsubscribegooglegroups.com or reply to this email with the words "REMOVE ME" as the subject.
