China May Emit Worst Greenhouse Gases as Europe Bars Credits

Chinese companies may release some of the worst greenhouse gases into the atmosphere should Europe stop paying for credits they get for destroying the byproducts, said a state fund that collects money from the manufacturers.

Credits given for burning off hydrofluorocarbon-23 won’t be accepted in Europe, the largest emissions-trading market, from May 2013 after a decision to ban the gas. Companies have sold credits to cover disposal costs. HFCs are known as super gases as they can trap 11,700 times more heat per molecule than carbon dioxide and remain in the atmosphere for more than 200 years.

“If there’s no trading of credits, they’ll stop incinerating the gases,” Xie Fei, revenue management director at China Clean Development Mechanism Fund, said in an interview at the Carbon Forum Asia in Singapore. “That’s what almost all the big Chinese producers of HFCs have told me. They say they can’t bear the cost. They’ll lose competitiveness.”

Australia and New Zealand have also sought to bar the use of HFC-23 credits, or offsets, leaving few buyers after 2012.

“It’ll become a junk market,” Geoff Sinclair, head of carbon trading at Standard Bank Plc, said yesterday in an interview in Singapore. “No one will take them.”

Countries can use the offsets to meet emission-reduction targets under the Kyoto Protocol in the five years through 2012. Nations including Japan and Spain have invested in projects to destroy HFCs, and firms such as Citigroup Inc., Deutsche Bank AG (DBK), EON AG and Enel SpA have bought the credits since 2005.

Finance Ministry

Projects to cut HFC-23 emissions have been granted 351 million metric tons of offsets since the program overseen by the Union Nations began handing them out in 2005.

The Chinese fund overseen by the Finance Ministry collects part of the revenue local projects earn from selling UN emission credits. It gets 65 percent of its carbon-credit sales from HFC- 23 projects, 35 percent from adipic acid projects and 2 percent from wind, solar and hydropower projects, Fei said.

The fund has collected 8 billion yuan ($1.3 billion) since it was created in 2007, using the cash to set up carbon policies and invest in Chinese projects that reduce emissions. The fund began investing in 2011 and financed about 20 ventures including energy efficiency and renewable power developments, Fei said.

To contact the reporters on this story: Natalie Obiko Pearson in Mumbai at npearson7@bloomberg.net; Mathew Carr in London at m.carr@bloomberg.net

To contact the editor responsible for this story: Mike Anderson at manderson34@bloomberg.net