Nitrous oxide is a greenhouse gas accounting for around 6% of the heating effect of greenhouse gases in the atmosphere. A 2008 study by Nobel Laureate Paul Crutzen suggests that the amount of nitrous oxide release attributable to agricultural nitrate fertilizers has been seriously underestimated. A new study suggests that N2O emission currently is the single most important ozone-depleting substance (ODS) emission and is expected to remain the largest throughout the 21st century.

Nitrous oxide reacts with ozone and is the main naturally occurring regulator of stratospheric ozone. Nitrous oxide is also a major greenhouse gas and air pollutant. Considered over a 100 year period, it has 298 times more impact per unit weight than carbon dioxide.

The project involves the purchase and installation of a precious metal catalyst in the plant in Uzbekistan. The production of nitric acid gives off N2O, an unwanted by-product, which is currently being vented into the atmosphere, contributing to global warming. The introduction of a catalyst in the production process will destroy approximately 80% of the N2O that would otherwise be vented into the atmosphere. The Kyoto Protocol provides an approved methodology pursuant to which the party that is responsible for abating the N2O is eligible to obtain 310 carbon credits for each tonne of N2O abated.

The project will use technologies designed by authorities on N2O emission monitoring.

Based on the current nitric acid production level of the project, both CRI /Criterion Catalyst Company, a wholly owned subsidiary of Royal Dutch Shell plc., and ClimeCo have conducted studies at the plant that predict N2O abatement that may result in 800,000 – 1,000,000 tonnes of Certified Emission Reductions (CER) every year.

The Net Present Gross Value of the project based on 800,000 CER every year and an 8% discount rate is estimated at US$58.4 million. The funds for the CER are received at the beginning of each year for the N2O removed the year before.

“We are very excited about signing our first project in Uzbekistan. The technical report we received from CRI /Criterion Catalyst Company, a wholly owned subsidiary of Royal Dutch Shell, confirms that there is an annual CO2 abatement of more than 1.1 million credits. We have an experienced management team and we look forward to working on this important project,” said Shlomi Palas, CEO of Blue Sphere Corporate.

Blue Sphere intends to finance part of the project using other capital sources (such as project financing firms or carbon credit traders) which would, if successful, improve the return on equity.

Uzbekistan is a CDM (Clean Development Mechanism) country in good standing and has other N20 abatement projects registered. All regulatory and operative structures are already in place.

The Clean Development Mechanism (CDM) is an arrangement under the Kyoto Protocol allowing industrialised countries with a greenhouse gas reduction commitment (called Annex 1 countries) to invest in ventures that reduce emissions in developing countries as an alternative to more expensive emission reductions in their own countries. A crucial feature of an approved CDM carbon project is that it has established that the planned reductions would not occur without the additional incentive provided by emission reductions credits, a concept known as "additionality".

The CDM allows net global greenhouse gas emissions to be reduced at a much lower global cost by financing emissions reduction projects in developing countries where costs are lower than in industrialized countries.