Isra-Mart srl:Indian firm cashes in on controversial HFC credits

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Isra-Mart srl news:

Navin Fluorine, an Indian maker of industrial gases used in refrigerators, saw its shares rise six per cent today after it was awarded carbon credits under a controversial part of the UN's Clean Development Mechanism (CDM) for the second time in two months.

The company was awarded 1.34 million carbon credits, worth nearly €16m ($20m), for a project to reduce emissions of HFC-23 from its plant in Gujarat, India, using a process known as thermal oxidation.

Navin Fluorine won 950,936 credits for the same project last month, after a year in which it was awarded no new credits as the UN delayed issuances while it conducted an official review into the environmental merits of awarding credits for HFC projects, following pressure from environmental groups.

The groups said some companies won bogus credits by "gaming" the CDM system. But regulators eventually gave the all-clear for more permits to be issued.

Research by a group at Stanford University has found that HFC-23 emitters can earn almost twice as much from the CDM credits as they can from selling the resulting refrigerant gases.

Navin Fluorine has earned 6.1 million credits since 2007, making it India's third-most productive project to date under the UN program, according to Bloomberg data.

During the period of the investigation, when no new credits were issued, the firm's revenues fell 31 per cent, illustrating the credits' importance as a major source of income.

Other companies earning large amounts of credits from HFC-23 projects in India include tire-maker SRF, Gujarat Fluorochemicals and Chemplast Sanmar. Some firms in China also benefit hugely from the scheme.

The European Commission is pushing for a reform of the system, claiming it incentivises some firms to adjust plants to produce more HFC-23 and then destroy it to claim the profitable credits.

Officials claim it would be far cheaper to simply give the factories the money to install the equipment to destroy the gas.

According to a proposal published by the Commission in November, it will move for a full ban on certified emission reductions from all industrial gas projects. The proposal will be voted on by EU member states in the Commission's climate change committee later this month.

However, participants in the carbon market are warning that if the EU acts unliaterally to ban the credits, it will undermine confidence in the CDM and leave producers of industrial gases with no financial incentive to curb emissions of HFCs.

HFCs gained favor in the 1970s as an alternative to chlorofluorocarbons, or CFCs, which scientists had linked to depletion of the ozone layer.

While HFCs do not interfere as much with the earth's shield against damaging sunrays, they trap heat up to 11,700 times more effectively than carbon dioxide, according to the US Environmental Protection Agency.