China carbon market money-spinner near ending -UN

BONN, May 17 (Reuters) A lucrative carbon trade spawned by the destruction of greenhouse gases called hydrofluorocarbons (HFCs) is closer to ending after China accepted that it has unintended side-effects, a UN official said today.

A by-product of the refrigerant industry, HFC 23 is much more potent than the main greenhouse gas, carbon dioxide, and by destroying it Chinese and Indian companies have been able to sell millions of carbon credits under Kyoto Protocol rules.

Chemical companies have been earning millions of dollars from the trade. It is feared that this money will now fund an expansion of their activities and increased production of another by-product, HFC 22, which harms the ozone layer.

At a meeting of governments in Bonn this week the Chinese accepted the risk to the ozone layer, which is protected by a separate pact, the Montreal Protocol.

''We're moving from a refusal to talk about it to an acceptance it's an issue,'' said Halldor Thorgeirsson, the United Nations' head of carbon trading.

''They've accepted carbon crediting would have to take account of the Montreal Protocol.'' The next step would be a deal hammered out this December at a climate summit in Indonesia, for example limiting chemical companies to only enough carbon credits to pay for the cost of destroying the HFC gases.

Whatever was left could be used to pay for other, less profitable projects fighting climate change, Thorgeirsson said.

Reuters PB VV2317