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Carbon Finance Comes Of Age

Publication Date: 
April 17, 2008
Marc Gunther

Lecturer in Law Michael Wara is quoted in a Fortune story about the practice of carbon trading--"the business of buying and selling rights to pollute the atmosphere with carbon dioxide and other greenhouse gases":

There has never been a better time to own a polluting factory, landfill, coal mine, or chicken or pig farm in the developing world. Best of all is to own a plant that emits industrial gases like nitrous oxide, PFCs, or HFCs that are the most potent - and therefore the most valuable - of the regulated greenhouse gases. Consider HFC23, a refrigerant gas that traps heat effectively, whether in a vending machine or the earth's atmosphere. Because emitting one ton of HFC23 is the atmospheric equivalent of emitting 11,700 tons of carbon dioxide, trapping a single ton of HFC23 generates 11,700 CERs. The result is that factories in China that install equipment to destroy HFCs, which is standard in much of the West, generate millions of credits and windfall profits - as much as $6 billion of credits for making about $150 million in pollution-control investments, according to Michael Wara, a lecturer at Stanford Law School who exposed the problem last year. Chinese refrigerant companies, he says, have become carbon-credit factories that only incidentally sell refrigerants. "That's a major distortion of the market," Wara says.