I have mentioned before how the gas HFC-23 causes problems in carbon markets. A recent article in The Economist describes the ongoing problem and how it might be addressed. The basic problem is that firms can earn so much for destroying HFC-23, they actually have an incentive to produce it for that purpose:
You cannot simply set up an HCFC-22 plant and demand cash; eligibility is limited to companies which were already producing the gases in 2000-04, and companies are capped in the amount they can receive. But there is little incentive for approved incineration schemes to reduce the amount of HFC-23 that they produce. Quite the reverse, argues CDMwatch, a group that monitors the offset market. It says it has shown the CDM executive board that some plants have reduced their HFC-23 production during periods in which they were ineligible for CERs and upped it when they became eligible again, gaming the system. “They found the smoking gun,” says Michael Wara, a professor at Stanford Law School.
All told, offset systems have a lot of promise. They could allow emission reduction targets to be reached more fairly and at lower cost. It is essential, however, that they be designed and operated in ways that prevent this sort of abuse.