As the cdm mechanism provides, nations that must reduce their greenhouse gas emissions can buy these units, each a tonne of carbon dioxide equivalent. A buyer already exists for gfl: the Netherlands government, assisted by Rabobank. The project is truly global. The British government has allowed Ineos Fluor Limited — a company that, among other things, manufactures and supplies refrigerants — to provide gfl the requisite technology. The Japanese government has allowed Sumitomo Corporation to assist in maintaining and operating the plant; by so doing, they will pick up cers for the Japanese government. What’s gfl earning by selling 3 million cers every year? Down To Earth’s efforts to discover prices were not successful. “As a bank policy, we do not give names of our clients,” informed Genneke Segers, head of the carbon procurement department, Rabobank. “But since information regarding our transaction with gfl is available on the unfccc website, we can merely state we will buy cers from them. The price and volume are confidential information,” added Segers. When contacted, Ineos Fluor Limited clarified they are not buyers, but that they own a part of the cer s. But “information regarding the volume of cers we own is between gfl and us,” explained Louise Calviou, business development manager, Ineos Fluor. “Putting it in the public domain would mean a breach of contract.”
In other words, the market for cers is completely non-transparent. During discussions with various cdm stakeholders Down To Earth found that the cheapest carbon credits can be sold for is us $5 per cer; the price can go up to us $10 per cer. Thus, if we assume the lowest rate, gfl will get Rs 68 crore each year. Since the deal is expected to last for 10 years, gfl — at the least — will make Rs 680 crore.
Also meet SRF
srf Fluorochemicals, a factory based in village Jhiwana, Alwar district, Rajasthan, is also in the cer business. As the company informs, it could sell up to 3.8 million cers every year. Their deal, too, is a 10-year one, making it 38.3 million cers. Here, too, the company was secretive about revealing the cer price to the public. When asked about it at an investors and analysts conference, Ashish Bharat Ram, srf’s president and executive director, said: “We cannot share the price of the cers due to confidentiality reasons.”
Assuming the least price per cer — as above — srf will annually make Rs 86 crore (Rs 860 crore over 10 years). srf’s project has been validated by Det Norske Veritas (dnv) — a project validating concern. It will shortly be listed for clearance at the cdm board. srf has signed contracts with uk -based icecap Trading (set up to trade in carbon) and multinational oil-major Shell International Trading Group for an initial 500,000 cers. P urchase agreements for cers have also been signed with two carbon trading funds: kfw Germany and edf Trading, uk.
Two companies. A global mechanism to combat climate change. It is a grave public concern that such a mechanism is riddled with lack of transparency. The process adopted should not become a precedent. No doubt it is a lucrative business. The stock prices of these companies have increased but this is not a matter of money, but of public global interest.
A gas called HFC-23
These companies manufacture hcfc-22, a gas used in refrigeration. It generates a by-product called hfc -23. The global warming potential of carbon dioxide is 1, hfc-23’s potential is 11,700: it is that potent. Thus all srf and gfl have to do is to capture and destroy hfc-23 before it melts into the atmosphere. For this, the companies need ‘thermal oxidation’ (incineration) technology. srf says it needs Rs 13 crore for it; gfl didn’t disclose the amount, but the cost will be comparable. And on this technology is predicated what could be called the cdm windfall the companies are looking to.
A windfall called HFC-23
hfc-23’s destruction is globally the most popular cdm scheme. Projects promising to do this were the first the cdm board approved in India. The unfccc secretariat estimates that if 30-odd plants manufacturing hcfc -22 — in the process incinerating hfc -23 — already set up in developing countries apply for cdm benefits, more than 100 million cer s per year could be generated by 2012 (the time by which developed countries must meet their first set of commitments to reduce global warming). This is a large slice in the cdm market, which is 50-180 million tonnes of carbon equivalent, or 50-180 million cer s, per year, as per a 2005 study commissioned by the Union ministry of environment and forests (moef).
Now, this slice is just the thing developed nations want. And, as matters stand, burning hfc -23 is about the cheapest, easiest and most reliable way to cash in on cdm benefits. It is a very sweet deal. All it requires is incinerate the gas.
No wonder then, in terms of the projects registered and under unfccc validation, hfc -23 accounts for almost 12 million cers a year, roughly 24 per cent of all cer s being sold. No wonder, srf and gfl are dreaming of a rosy future.
Complicated global process
Is it easy to get a cdm project cleared? Project proponents develop a project design document (pdd), for which they usually hire a consultant (see chart: Worthy of credit).
