China 'Paid to Pollute' Says Rep. Issa

Press Release

A hearing by the Full Oversight and Government Reform Committee on the environmental impact of the Montreal Protocol, today, revealed alarming information about Chinese manipulation of international carbon markets due to a loophole in the flawed Kyoto Protocol.

"China is exploiting the flawed Kyoto Protocol and the environment to position itself to make billions of dollars off efforts by the international community to clean-up our air," said Rep. Darrell Issa, ranking member of the Subcommittee on Domestic Policy.

The revelation at the hearing followed a question posed by Rep. Issa, who asked the panel of experts if China was exploiting flaws in international emissions treaties for financial gain.

Mr. Alan Thornton, Executive Director of the Environmental Investigation Agency (EIA), an international nongovernmental organization with expertise on the Montreal Protocol and Dr. Mack McFarland an Environmental Fellow with DuPont Fluorproducts, who testified before the committee, confirmed that China is gaming the international carbon credit system.

As explained at the hearing, the Chinese produce excess quantities of HCFCs (hydro chlorofluorocarbons - chemicals commonly used as refrigerants), which is permissible under both the Kyoto and Montreal Protocols. The HCFCs release HFC-23, which is a regulated emission under the Kyoto Protocol. The Chinese then "capture" the HFC-23 emission. Over the course of 5 years, it will cost the Chinese an estimated $135 million to capture the harmful emissions - but using the loophole, the Chinese are able to sell the carbon credits they "earned" through this clean-up for literally billions of dollars in the international carbon market.

Likely due to this perverse incentive created by conflicting rules in the Montreal and Kyoto Protocols, China has been ramping up their production of HCFCs to maximize emission levels by 2016. Under the terms of the Montreal Protocol, permissible emissions levels of HCFCs will be frozen at 2016 levels until 2040.

According to the testimony of Mr. Allan Thornton, "Under Kyoto's Clean Development Mechanism, developing countries can earn Certified Emission Reduction Credits (CER's) for the destruction of a chemical known as HFC-23. This carbon credit can then be sold on the global carbon market." He estimated that "the cost of capturing and destroying all eligible HFC-23 emissions through 2012 is $135 million, but the value of the HFC-23 CERs on the carbon market through 2012 is approximately $6.4 billion."

Issa, together with Ranking Member Tom Davis (R-Va.), last week requested that the Government Accountability Office provide information on domestic emission offset programs and mechanisms for ensuring their credibility.

"This is a glaring flaw within the structure of the international carbon market. China is literally paid to pollute," said Rep. Issa. "The United States should prohibit the importation and sale of Chinese products that use HCFCs from entering the U.S. market."

Source