When it comes to Europe's carbon-trading system, top companies
like Dow Chemical, ConocoPhillips, and BP prefer to save a little
money than hone their 'green' reputation.
Europe's carbon trading system was supposed to reduce greenhouse-
gas emissions. But at least one of its methods for doing so may
actually have increased those emissions.
The scheme was dubious enough that the European Union (EU) banned
it as part of the trading system, effective May 2013. But some of
the world's largest energy and chemical companies, far from
distancing themselves from the program, continue to use it to offset
their emissions - or at least leave open the option of using it
until the ban goes into effect.
It's a sign that when it comes to reducing greenhouse gases in
the EU, protecting one's reputation as an environmentally
responsible company doesn't seem to matter as much as saving money.
In this case, the savings are quite small by corporate standards. By
one estimate, those savings amount to $24 million, pocket change
compared with the combined $53 billion in profits earned last year
by Dow Chemical, ConocoPhillips, and Chevron in the United States,
BP in Britain, and Statoil in Norway - all of whom have relied
heavily on the questionable scheme to offset their emissions.
"Companies will look to comply with EU emissions regulations in
the most cost-efficient way," says Richard Chatterton, a London-
based carbon market analyst at Bloomberg New Energy Finance, a news
and analysis service. "Although market participants are free to hold
a view on the ethics of action on climate change, the EU [system] is
driven by economics."
The questionable program became possible because Europe's climate-
change legislation requires its power and processing plants,
including subsidiaries of US companies, to meet greenhouse-gas caps.
They can cut emissions (by investing in green technologies, for
example) or offset them by buying carbon emissions reduction
certificates (CERs), commonly called carbon credits. Because of the
way the carbon trading system was set up, companies often found it
cheaper to offset their emissions rather than cut them.
This created a vast demand for CERs, a tool set up by the Kyoto
Protocol and supervised by the United Nations to subsidize climate-
change mitigation projects in emerging countries. A few industrial
gas manufacturers, mostly based in China, committed to capture and
destroy a potent greenhouse gas called fluoroform, or HFC-23, which
is used in a wide variety of applications, from suppressing fires to
plasma etching in the semiconductor industry.
The controversial credits proved immensely popular. The 19
industrial gas destruction projects originally approved for use in
Europe's emissions trading system racked up almost 500 million
credits worth $3.3 billion, representing the large majority of all
CERs issued to date. Nearly 90 percent of the credits flooded the EU
where they accounted for more than half of the total emissions
In 2009-2010 American corporations purchased almost 1 million HFC-
23 credits at an average market price of $16 per CER. Among US
companies, Dow Chemical Co. purchased the biggest volumes to offset
emissions from plants in Germany, the Netherlands, Belgium, Spain,
and Poland. ConocoPhillips, Chevron, and Cabot Corp. also bought a
considerable volume of the dubious credits. Their EU competitors,
including Royal Dutch Shell, BP, Statoil, Germany's RWE, the Italian-
Spanish Group Enel-Endesa, and the French group EDF, began to use
them heavily, too. These 10 publicly traded companies banked a total
$254 million in the dubious credits through 2009 and 2010. …