Investors Buy Emission Credits

A consortium of investors has arranged to purchase 29.5 million metric tons of CO₂-equivalent emission reduction credits (CERCs) over six years in a deal valued at about $600 million at current prices.

The deal, arranged by London-based Climate Change Capital, includes Deutsche Bank, Morgan Stanley, and Centrica, a U.K.-based energy supplier. Climate Change Capital's Carbon Fund, which just raised $830 million from investors, will also invest in the credits.

The CERCs will come from Zhejiang Juhua Co., a Chinese firm that generates HFC-23 (trifluoromethane) as a by-product of making HCFC-22 (chlorodifluoromethane), a refrigerant used in room air conditioners. HFC-23 has a global warming potential 11,700 times greater than that of carbon dioxide. The Zhejiang deal follows a similar one backed by the World Bank (C&EN, Sept. 4, page 8).

Purchase of Zhejiang's CERCs will help underwrite a facility to decompose HFC-23 now vented into the atmosphere at the firm's 16,000-metric-ton-per-year HCFC-22 production line just outside of Quzhou City in Zhejiang province. The Chinese government will use revenues from the CERCs to underwrite other environmental projects in China.

According to United Nations documents certifying the project, JMD Greenhouse-Gas Reduction Co., partly owned by Japanese trading firm Marubeni, will install the steam decomposition facility.

Climate Change Capital says the consortium's CERCs will be eligible for purchase and sale on the electronic trading system set up under the European Emissions Trading Scheme. European Union firms can use the credits to offset emissions above their allotment under rules put in place to meet Kyoto protocol targets.

The consortium is hoping that the CERCs, worth $20.32 apiece today, will be more valuable in the future. According to the European Topic Centre on Air & Climate Change, the 15 pre-2004 European Union member states will not be able to achieve their greenhouse gas emission reduction targets without purchasing CERCs from other countries.