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A recent article in the NY Times, "Outsize Profits, and Questions, in Effort to Cut Warming Gases," details an unhealthy outgrowth of the Kyoto Protocol:

Under an obscure UN-backed program, businesses in wealthier nations of Europe and in Japan help pay to reduce pollution in poorer ones as a way of staying within government limits for emitting climate-changing gases like carbon dioxide, as part of the Kyoto Protocol.

Among their targets is a large rusting chemical factory here in southeastern China. Its emissions of just one waste gas contribute as much to global warming each year as the emissions from a million American cars, each driven 12,000 miles.

Cleaning up this factory will require an incinerator that costs $5 million -- far less than the cost of cleaning up so many cars, or other sources of pollution in Europe and Japan.

Yet the foreign companies will pay roughly $500 million for the incinerator -- 100 times what it cost. The high price is set in a European-based market in carbon dioxide emissions. Because the waste gas has a far more powerful effect on global warming than carbon dioxide emissions, the foreign businesses must pay a premium far beyond the cost of the actual cleanup.

The huge profits from that will be divided by the chemical factory's owners, a Chinese government energy fund, and the consultants and bankers who put together the deal from a mansion in the wealthy Mayfair district of London.

Mayfair Millionaires created by Kyoto? THAT is not cool, and really needs to be addressed if this nascent market will take root and gather strength. All new markets MUST have the confidence of all participants, and if there are these few winners, taking advantage of loopholes, other forms of capital will stay away.

Terrapass addressed this very same issue (and article) in a recent post:

HFC-23 is a refrigerant with very powerful effects on global warming - it's almost 12,000 times as bad as carbon dioxide. It's also quite easy to destroy. A small investment in process changes in aging factories can easily destroy the gas. The problem, according to Swiss consultant Othmar Schwank, is that the global carbon industry created by the Kyoto Protocol has made these small investments obscenely profitable, so much so that they are overwhelming investments in energy efficiency and renewable energy that are more valuable in the long term.

The result is that a whopping 31% of the anticipated volume of CDM credits comes from just 17 HFC projects (the Times uses a 66% number which only includes registered credits). Compare this with 6% for wind.

These early HFC projects have overwhelmed the early market, but indications are that they are already waning. But, even more importantly, as Terrapass concludes:

Markets and policymakers learn together. America is not part of the conversation. 1,500 projects across 25 categories. 1.6 billion tons of CO2 reductions. A $28B trading market. Thousands of professionals energized and motivated to fight climate change. Hedge funds. Promoters. IPOs. Naysayers. The rest of the world is motivating to fight climate change and America is curiously absent.

C'mon, America! Let's get our act together and jump in, shall we?

That is such crap. They should buy 100 of those and spread them around the world!

A lot of economists argued that Kyoto was flawed from the start.

But the carbon trading is not as bad as it sounds.

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