How to get rich

So you think giving developing countries all those free "carbon credits" is going to cut greenhouse gas emissions and save the planet? Think again.

Through a bizarre but wholly foreseen loophole in the UN's Clean Development Mechanism (CDM) system, payments are actually incentivising manufacturers in China and other developing countries to continue producing one of the most potent of all greenhouse gases, the ozone depleting substances (ODS) known collectively as CFCs, used for refrigeration and other industrial purposes - at a cost to British and other developed world consumers of over $18 billion.

And it all started with such good intentions. To rid the world of these supposedly harmful substances, an international agreement called the Montreal Protocol was signed in September 1987 and became effective in 1989, with the original intention of phasing out ODS consumption by 2040, now brought forward to 2030.

To assist developing countries switch production to less harmful substances, the major developed countries set up a "multilateral fund" administered by the World Bank, of which $150 million was earmarked for the largest CFC producer in the world, the Peoples' Republic of China.

Had it been left there, with a whole raft of controls kicking in, no doubt CFC production in the developing world would be tailing off. But that was to reckon without the 1997 Kyoto protocols that included CFCs in a range of six "greenhouse" gasses, elimination of which could qualify for CDM funding.

Where this kicked in was in factories which produced the refrigerant known as HCF-22, in the making of which a by-product HCF-23 is also produced, a gas with the greenhouse potential 11,700 times that of carbon dioxide.

In developed countries, local pollution laws required that this gas was captured and destroyed as part of the process. But in the less controlled and more primitive conditions of China and elsewhere, it was vented to atmosphere – until some bright entrepreneurs realised that capture and destruction qualified for "carbon credits".

Thus, they set up a cheap network of destruction units, which essentially became cash machines. And so lucrative has this scam beome that, in February of this year, the United Nations Environment Programme (UNEP) was driven to publish a report on how it was distorting the whole CDM system.

As of 10 February 2009, it noted, the CDM Executive Board had issued over 250 million certified emission reduction credits (CERs), each CER being equivalent to one ton of CO2, for a total of 1,390 registered projects. These issuances had occurred over a period of just over two years.

To date though, it had found that over half of the CERs issued (130 million) come from one process alone – CFC destruction, with China (followed by India) taking the lion's share.

In fact, China alone had received 90 million CERs, valued at well over $1 billion. Furthermore, for a mere 11 of the 1,390 projects, nearly $6 billion-worth of CERs have been approved. Less than one percent (0.79%) of the projects are getting 36 percent of the finance. And, over the full duration of the scheme, the plants could earn as much as $17 billion.

This, though, is only one aspect of an increasingly bizarre situation. As early as 2007, a Stanford University researcher reported that, because of the huge greenhouse potential of HCF-23, destruction of this by-product was actually earning twice as much as producing the HCF-22 refrigerant.

Thus, the system had created a perverse incentive to keep producing. Even if the manufactures did not sell any of their product but simply kept making it, they would rake in twice as much money as they had previously.

In fact, the UN had been warned of this possibility in 2004, and of a probability that the CDM funds would be used as a cross-subsidy to cut the price of HCF-22 and thereby increase its sales. Not only has that occurred, however, there has built up a significant illicit trade, with 51 percent of illegal exports being attributed to China. Illegal product is even entering the United States via Mexico.

All of this is being done in the name of greenery - saving the planet. But the real reason, of course, is to underpin the carbon market which has proved so lucrative for Western financiers.

Nevertheless, with the costs paid by consumers in developed countries through our electricity bills, we at least have the comfort of knowing we are making some Chinese (as well as Indian and Brazilian) CFC producers very rich.

CLIMATE CHANGE – NEW THREAD

A fruit and nut case

First it was Marks & Spencer set to make a tidy dent in Gordon Brown’s financial plans - and now it's the chocolate-maker Cadbury.

According to the Financial Times and others, as the ECJ rules on the M&S case, bringing it to an end, another one starts, brought by Cadbury Schweppes, which could cost European governments over £300 million in annual tax revenues if the company wins.

This is over UK rules - known as controlled foreign company (CFC) legislation – which Cadbury claims infringes European law by penalising companies that take advantage of low tax rates in other EU countries. Cadbury Schweppes is challenging the British government's decision to tax profits earned by Cadbury's Treasury subsidiaries based in Ireland, one of the lowest tax jurisdictions in Europe.

Says the FT, the potential losses will add to pressure on European governments braced for the M&S judgement. Says Stefano Marchese, vice-president of the European Federation of Accountants: "There could be a flow of Treasury, finance and royalties functions to companies created in low-tax jurisdictions, increasing pressure on tax competition."

Marchese says there is substantial case law supporting the view that CFC rules are illegal within Europe, although it was possible the judgement could be influenced by political lobbying. Finance ministers have been particularly concerned about the cost of claims for tax refunds, provoking speculation that the ECJ will decide to impose limits on retrospective claims.

However, László Kovács, the EU tax and customs commissioner, has a better answer, calling for a common set of rules on company taxation. Johann Müller, an international tax expert at Dutchtax.net, an Amsterdam-based consulting company, agrees. "The case will force EU tax harmonization across the bloc through the back door," he says – which should go down like a house on fire with member states.

Either way, the somewhat embattled Gordon is facing a torrid time but, little did he suspect that he was to be shafted by a Cadbury’s fruit and nutcase.

PS: lite blogging today... off to that pointy building by the Thames.

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More hidden Europe

It seems a bit odd to be writing about fridges, with the tumultuous events in Ukraine, which seem poised to precipitate that uneasy corner of the globe into a bloody civil war – or not – but my colleague will be addressing that issue later in the day, day job permitting.

So to fridges, with a startling photograph in the print edition of The Daily Telegraph today, showing a "mountain of unwanted fridges with nowhere to go".

The picture illustrates 44,000 discarded fridges and freezers, in one of four dumps in the Manchester area: there is another one of 36,000 unwanted units at a site nearby, both near the Manchester Ship Canal, with two more mountains, at nearby Chadderton and Failsworth, making an estimated 120,000 fridges awaiting disposal in the area.

But no prizes for journalist David Sapsted, who begins his piece (only in the print edition) with the words "this shocking monument to the waste of the consumerist age contains more than 44,000 fridges".

I think the technical word for this, as a piece of journalism, is "crap", although I am sure readers might have their own favourite expression for it. Fridges are bought, they are used, and they wear out. If it is a monument to anything, these fridge mountains testify to the utter fatuity of EU Regulation 2037/2000, which came into force on 1 January 2002, ostensibly to prevent the escape of ozone-depleting chlorofluorocarbon (CFC) gases.

It was this EU law that turned a successful and effective fridge collection and disposal sytem, with a high level of recycling, into the shambles it has become today, not least because with this law it became a criminal offence to recycle fridges and freezers.

This was actually pointed out by Christopher Booker in his column of 7 October 2001, when he pointed out that, each year three million fridges and freezers become surplus to requirements in Britain alone each year. But, at that time, 99 percent, taken in part-exchange, were turned into scrap or reconditioned by specialist firms to meet a huge export demand from Africa and eastern Europe.

Booker featured a firm called Border Refrigeration, near Abergavenny in south Wales, owned by Fred Probert, which collected fridges and freezers taken in part-exchange by major retail outlets. Most were refurbished and shipped out in containers to west and east Africa and Romania, where they were highly prized. He described how, at a port near Lagos, Mr Probert had seen his machines being carried on the heads of teenage boys to be loaded on to battered Volkswagen pick-up trucks and transported all over Nigeria.

With import duties and low wages making the cost of new machines prohibitive, refurbished freezers were snapped up not only by domestic users and ice-sellers but by doctors 600 miles out in the bush, for whom they were a lifeline to store drugs and medicines. Because Nigeria shares Britain's 240-volt system, they could not be imported from elsewhere.

Booker returned to this issue in his column of 14 October 2001, when he warned that, once discarded fridges and freezers were declared "hazardous waste" under the EU regulation, there would be "absolutely no legal way to dispose of them".

Charles Clover then picked up the story, in The Telegraph on 22 November 2001, reporting that what had made the problem particularly acute was a ruling by EU lawyers that the regulation applied not only to the CFCs used as coolant - which were being collected already - but also to bubbles of CFC in the insulation, for which there were currently no disposal facilities in Britain.

There was, therefore, plenty of evidence that this was and is yet another of these EU-made disasters, yet today's Telegraph tells us this is a "monument to the waste of the consumerist age". As I said: "crap".

Not to be outdone in the league of fatuous reporting, however, The Independent also covers the story, under the heading "Waste Britain", giving journalist Charles Arthur an opportunity to survey "the state of the nation's rubbish".

Arthur would have it that this is all to do with Britain’s failure to respond to basically benign EU laws, without realising – or informing the readers - that, until the EU interfered, these problems were being dealt with, and that they have become significantly worse since the EU interfered. This has been pointed out in previous postings on this Blog.

It really is a strange phenomenon of our time that journalists literally cannot see the wood for the trees, and fail to make connections that are obvious to those who have taken the trouble to find out.

No wonder EU gets such an easy ride when it makes its outrageous claims about protecting the environment. When journalists fail to lay the blame for the disasters that arise at the feet of those who caused them, we have another case of "hidden Europe", and the EU gets away with it once again.

The hypocritical environmentalists

The slime who pretend to be environmentalists, pouring out their venom at anyone who has the temerity to disagree with them, might garner a little credibility if they ever expressed some concern about the great CFC scam.

Booker has picked it up again in his column, noting that even [some] greenies have become so outraged by this ridiculous racket that the Environmental Investigation Agency has described it as the "biggest environment scandal in history".

Yet Monbiot and his claque, who are so strident in support of the likes of Pachauri who actually helped devise the obscene system which gives rise to this scam, are strangely silent when it comes to an abuse which has been going on for years.

These people are not environmentalists – they know nothing of and care nothing for the environment, and would accept any abuse if it fits in with their belief system. There is no real description for these people. They are the dregs, more so for their hypocrisy in pretending to care for something that they are actually helping to destroy.

COMMENT THREAD

Perverse consequences

How to get rich was our subject for discussion last December as we reported how the CFC scam, mainly in China and India, was making entrepreneurs obscenely rich out of selling carbon credits through the UN's Clean Development Mechanism (CDM).

Now, six months later, Le Monde has picked up exactly the same story (translation here), complaining that CFCs have become the main source of the CDM.

Half a billion tonnes of CO2 (equivalent) "saved" through the CDM between 2004-2012 have come from the destruction of HCF 23. As we pointed out in our piece, this is the by-product of HCF 22 production but so lucrative has the CDM business become that the by-product has become the product.

We now have the perverse consequences, says Le Monde, that because the price paid for the destruction of gas is up to 70 times the actual cost of production, it is being produced solely in order to generate carbon credits.

Manufacturers have increased their production, artificially and deliberately maintaining high levels of HCF 23 production which would not exist if there was no financial incentive from carbon credit sales. Furthermore, it is estimated that these abuses have allowed the industry to collect one billion dollars annually.

Thus, concludes Le Monde, we see the absurd situation in which one "device" of the UN – the Kyoto Protocol - encourages the production of a gas, while another "device" of the UN - the Montreal Protocol - seeks its eradication.

Only the greenies could invent such a stupid, malign system – a cash-making machine creating money out of nothing, all in the interests of "saving the planet". And then they keep schtum about it as money pours into the coffers of carbon traders and opportunists. Where is Moonbat when you really need him?

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