Even the most experienced CDM methodology makers have a mixed record and often fail to bring the best out of the CDM Executive Board. Much needed methodologies were rejected repeatedly. ¾ of all approved methodologies are rather unusable and among the six most prominent methodology makers a failure typology is salient. I suggest to focus on the trajectories and externalities of technical change to improve choices and trade-offs in methodologies. Especially when technology provider companies and methodology makers are blocking each other.
Nitrous oxide Methodologies are quite often shaped by the interests of CDM developer companies proposing them and more so the more technically complex. A particularly illustrative example: the easier half of CDM projects for N2O abatement in ammonia plants were already done while it took the EB four years to learn about competing catalyst (platinum) technologies. The case of N2O shows the EB’s problem of access to the best expertise, aggravated by proprietary knowledge.
When Carbon Traders block the CDM Executive Board
The economics of innovation has been revived by Nelson and Winter and by Giovanni Dosi, establishing Evolutionary Economics. Several concepts for the influence of organizational routines are salient. One typology of innovations in large firms goes back to Keith Pavitt (from SPRU, Sussex U.). I explore this typology with evidence from the competition between N2O methodology proposals and the innovation services these technology providers bought.
Not knowing how technological complexity fits CDM regulations (maze of Marrakesh Accord interpretations), those owning or running the industries where N2O arises are usually at the receiving end. The providers of N2O abatement technology happen to be concentrated in Germany and so I wrote a history of CDM methodologies from their perspective (in german).
Even for more profitable CDM projects, technology providers mostly fail to invest in methodology making and Heraeus, BASF and Uhde allowed small N.serve GmbH and Carbon Climate Protection GmbH to launch themselves (carbon trader blockages). For N2O, the chemical engineering is concealed by commercial interest (profits built up into catalysts). The German Environment Ministry created NACAG in 2017, to pursue N2O mitigation, unfortunately ignoring the market relations between platinum catalyst suppliers and plant owners, and so the limits of AM28 and ACM19 will remain. NACAG ought to define how it allows for the confidentiality between suppliers and owners. That might be a lessons learnt from the CDM to avoid in Art.6, albeit a very special case. The German BMU has struggled to demonstrate quality in methodology making. BMU's efforts for F-gases (below) esp. via Proklima's HCFC-adder are even worse than NACAG. Lambert Schneider's inroads into standardized baseline making and the real impact of ACM19 should be brought to light. F - gases upstream In the famous case of HFC-23, the blockage originates in policy and the rather different political coalitions in the Montreal and the Kyoto Protocol regimes. Suddenly three years after Kyoto, in 2001, a Montreal - Kyoto link of such strength appeared potentially endangering the integrity of the KP. It illustrates rather well Sebastian Oberthür’s theory of relations between regimes (two oceanliners passing each other at night unrecognized by the passengers because of their glaring lights). This link occurs in the production of a refrigerant chemical HCFC-22, supported with Montreal funding, where HFC-23 is a by-product, vented and is eligible under Kyoto (GWP of 11,700). In other words, Montreal created a partial and short-term solution that affected the emissions trading with CDM. The environmentalists’ critique of the CDM by Michael Wara, most prominently, is based on a flawed assessment of this link because HFC-23 CER never affected the market signals of carbon trading. The HFC-23 blockage was also due to the weighing of benefits between China and other non-Annex B countries since 80% of worldwide HCFC-22 production is in private Chinese firms (mostly new ones). HCFC-22 und das Montreal Protokoll Regime
F - gases downstream
A tension "China against the other South" persists (HCFC-22's steep expansion was certainly avoidable). Montreal P. designed blueprint HCFC-22 Phaseout Management Plans" (HPMP) were copied in almost all (Article 5) countries. Taking advantage of the CDM blockage, some influence of DuPont, Dow and ICI works its way into some voluntary carbon methodologies (pursuing what is excluded from the CDM since EB34, Meeting Report paragraph 17), as I showed in two comments from GIZ-Proklima to the Climate Action Reserve (CAR) and in comments to the American Carbon Registry (ACR):
Public Comment to CAR Public Comment to ACR Foam Blowing Agents
Through the Kigali A., the overlap Montreal - Kyoto has become even stronger because the entire class of chemicals HFC is being influenced by both regimes (funds) directly. The HPMPs finance the switching to HFC and the CDM credited HFC reductions. There is a massive element of circular financing when Montreal funds increase HFC usage (esp. R410A) and CDM funds replacing them. This class of problems has not been addressed, a new illustration of Sebastian Oberthür's observation about regimes ignoring each other. A new class of Hydrofluorolefins (HFOs) is pursued by DuPont, Dow and Honeywell. The Chinese air conditioner industry decides whether HFOs can gain market share as a replacement of HCFC-22. The overlap between Kigali and CDM adds to a Chinese gain versus US gain problem. HFC-32 technology, promoted by Daikin, can grow into an intermediary step with HFC reduction financing. The connections between HCFC phaseout and HFC phase-down are yet to be turned into policy in most countries. For refrigerators, these connections play out well because these concern only foam blowing agents, as for the refrigerant gas in refrigerators, there is no alternative to the already dominant Isobutane. For air conditioners, export strategies are as uncertain as competitive. An overview of these and details of the Kigali A. and its implications for carbon accounting are outlined here:
A conceptual solution to the regime overlap is developed here, again using Pavitt's typology of innovation in large corporations:
HCFC in Montreal inertia, HFC in Kyoto inertia and the insiders' heuristics
Refrigerant suppliers and compressor suppliers are as reluctant as N2O technology suppliers have been to embark on methodology making (only BASF supplies both). But suppliers in the Montreal context might carry over their manipulative traits to the Art. 6. Hopefully, they will find that standardized baseline approaches are more difficult to use to their competitive advantage than the incremental cost definitions of the Multilateral Fund.
During the recent CDM EB121 meeting, members agreed to suggest to an NGO that they submit an HFC methodology to the CDM secretariat (thereby triggering technical analysis). This demonstrates a different blockage of the EB:
- let others address Montreal - Kyoto interactions and Kigali Implementation Plans first,
- avoid refrigerator and AC sectors as such (supply chain forces, economies of scale),
- hide HCFC and HFC phaseout schedules (and additionality) and
- ignore the existing HFC related methodologies.
Perhaps a benign explanation is the EB's inability to explicitely recognize how fragile/reductionist its interpretations of CMP decisions often are. Oberthür to propose a new metaphor for longlasting (121 - 34 = 87 mettings!) blockages, old excuses turned into new fashions.
Oberthür S. 2006, Institutional interaction in global environmental governance, Mass.: MIT.
Pavitt K. 1992, 'Some Foundations for a Theory of the Large Innovating Firm', In Dosi G. et al., Technology and Enterprise in a Historical
Perspective, Oxford: Clarendon Press, pp. 212-228.
Pavitt K. 1984, 'Sectoral Patterns of technical change: Towards a taxonomy and a theory', Research Policy, 13: 343-373.
Wara M. 2008, A Realistic Policy on International Carbon Offsets, Stanford University, Working paper 74.