Restricting N2O-based CERs and ERUs in EU ETS

One practical risk of restricting the use of nitric acid project-based CERs and ERUs for compliance purposes in the EUETS is that it could backfire – resulting in an increase in GHG emissions.

N2O abatement at a nitric acid plant is a costly and bothersome affair. After each campaign the secondary catalyst (which destroys the N2O) has to be removed and replaced. A fresh catalyst is installed. Leasing the catalyst is not cheap – typically a plant owner with 2-3 nitric acid lines might spend Euro 1 – 2 million during a year on leasing the catalyst.

If there’s no economic benefit coming from that, then a nitric acid plant owner in Russia, Ukraine or in some developing country will say: “I’d love to help, but I can’t afford that Euro 2 million every year just to be green.” So he will not renew the secondary catalyst lease, and emissions will revert to level they were at before the project.

Someone might argue: “Well it doesn’t matter because it’s a zero sum game anyway. Sure, emissions go up again in Russia (or wherever) but they go down again in England or Germany.”

This is not a good argument. 1. If the non-EU nitric acid plant has the kit in place already, it makes it easier, later, for the non-EU country to impose regulatory limits. 2. In the case of nitric acid projects, emission reductions are calculated on a conservative basis, so that the actual reductions are greater than the certified reductions. You would lose this differential if the projects were scrapped.

The EU is right to want to stop gaming. But I don’t think gaming is worth doing at nitric acid plants. It’s also fair for the EU to want to phase out supernormal profits from emission reduction projects. But by doing this before the project host-countries have in place their own domestic regulations means a lot of good work done so far on cutting emissions will just … er … go up in smoke. The secondary catalysts simply won’t be replaced.

The EU can resolve this situation by not imposing limits on nitric acid project ERUs and CERs. They could work with the relevant governments to help them introduce regulations which would apply once the CDM or JI projects reach an end.

This entry was posted in Climate change policy. Bookmark the permalink.