Last checked at 
* Germany sees cutting chemical plant emissions as priority
* Targeting HFC-23, N2O schemes at risk of closure
* Study finds project costs average 0.47 euro per tonne
By Ben Garside
LONDON, July 11 (Reuters) - Germany is advancing plans forrich countries to encourage the developing world to cutgreenhouse gas emissions by subsidising projects, replacing thefunding after a United Nations programme has run out of cash.
Such a move could yield cuts of around 5 percent of the gapbetween current government pledges and the amount needed by 2020to prevent climate change that would lead to rising seas,droughts and flooding.
It also could throw a lifeline to owners of those projectsthat would destroy particularly potent industrial gases who areunwilling to pay for the measures themselves and do not expecttheir host countries to introduce regulations for years.
"Some of the cheapest options available for cuttingemissions are at a real risk of stopping for purely politicalreasons," said Silke Karcher, an official at Germany'senvironment ministry.
"We are now looking at what is politically and financiallyfeasible to act, with money spent wisely and in a way that doesnot create perverse incentives."
The U.N.'s Clean Development Mechanism (CDM) channelled over$400 billion into projects over the last decade, but the fundinghas dried up as nations wrangle over a new global deal to tackleclimate change.
The CDM drew criticism because most of the money went towealthier emerging economies such as Brazil and China. Alsofunding was skewed to a small number of industrial gas projects,which critics said led to no sustainable development, hadquestionable environmental improvements and could have beenachieved more cheaply.
In response, EU nations restricted investment in the CDM toonly very poor countries and to projects with wider socialbenefits such as installing solar power or cleaner cook stoves.
Germany is concerned that even while emerging economies areincreasingly taking action to cut emissions, the drop in CDMsupport could leave projects that destroy highly warming HFC-23,adipic and nitric acid emissions at risk of being abandonedbefore a global climate regime starts in 2020.
Industrial gas projects have generated 54 percent of the 1.4billion credits issued under the CDM to date, Thomson ReutersPoint Carbon data shows.
An Oeko-Institut study commissioned by Germany found thatadditional funding for CDM projects and others outside the CDMcould prevent emissions of 800 million tonnes by 2020 at anaverage cost of 0.47 euros a tonne of carbon dioxide equivalent.
LOW-COST CUTS
The CDM allows investors to earn carbon credits they cansell to companies and governments of richer nations that usethem to help meet emission targets. But issuance of the creditshas dwindled as prices have crashed from above 20 euros a tonne($27.28) to less than 0.20 euros in six years.
Many of the 37 CDM projects have stopped at nitric acidfactories owned by British firm Johnson Matthey, saidGarry Crooks, a sales and marketing manager for the company.
He said just one Chinese project continued to verifyemission cuts under the CDM and that "quite a few" others werestill running in the hope of securing funding to cover costs ofaround 2 euros per tonne.
Owners are wary of disclosing their projects' status, saidCarsten Warnecke of consultancy Ecofys, which Germany hascommissioned alongside auditor TUV SUD to survey so-called"zombie" projects that were registered with the CDM but neverapplied for credits.
Only a third of the 7,789 registered CDM projects haveapplied for credits, Thomson Reuters Point Carbon data shows.
Without CDM revenue, industrial gas projects are less likelythan many schemes to abate emissions, because they do not leadto other sources of revenue such as selling electricity.
The Oeko report suggested that HFC-23 could be regulatedunder the U.N.'s Montreal Protocol, including possible financingfrom richer nations under its multilateral fund.
For adipic and nitric acid programmes, the report saiddeveloped nations individually or collectively could agree on aprice to pay for emission cuts via the CDM, without expecting touse any credits to meet the donor countries' emission targets.
Alternatively, funding could be channelled through anexpansion of the World Bank's Auctioning Facility, which is dueto launch later this year to buy credits from projects that cutmethane emissions at landfill waste sites. ($1 = 0.7331 euros) (editing by Jane Baird)
