The UN’s Clean Development Mechanism (CDM), a system whereby developed nations can earn certified carbon offset credits (CERs) by funding clean energy projects in the developing world, has come under fire again, this time from two separate reports. Both accuse the CDM of not adequately verifying that their credits are indeed being awarded to programs that would have otherwise not happened, an issue known as “additionality.”
David Victor and Michael Wara, two senior Stanford University academics, looked at thousands of offset projects and determined that anywhere from a third to two-thirds of the credits don’t actually represent
emissions cuts. Meanwhile, U.S. watchdog group International Rivers has released a report claiming that nearly three-quarters of CDM offsets recipients had completed their project by the time they were approved, which the report’s authors say proves that the offsets were hardly an impetus for the project.
“Judging additionality has turned out to be unknowable and unworkable,” Patrick McCully, director of International Rivers, told the Guardian. “It can never be proved definitively that if a developer or factory owner did not get offset income they would not build their project.”
The Stanford researchers also noted that the developed world is footing the bill for programs the UN is approving, many of which are necessary infrastructure projects, not specifically carbon abatement projects. The Stanford pair found in their research that nearly every new hydro, wind and natural gas-fired plant planned for construction in China in the next fews years is applying for CDM credits. “Rich countries are clearly overpaying by a massive amount,” Victor said.
The CDM offsets are designed to encourage projects like forest protection, wind farms and clean power plants that would have otherwise not happened had the UN not offered extra funds via the CERs. But how does one adequately evaluate if it was the CDM offsets that gave a wind project with multiple financiers, tax incentives and a long-term business plan the final push to become feasible? The problem, as these two reports allege, is that every enterprising energy developer in the developing world is applying for CDM CERs and all-too-often receiving, even if they would have built the project without them.
This is the same issue the World Wildlife Foundation raised months when they released a report calling alleging 20 percent of the CDM offsets are bogus.
The UN has argued that every step of the offset permitting process has “a responsible level of scrutiny” and that the entire process is then verified by a third party. The UN also points to the vibrant and growing market for carbon offsets, of which they are but a part, as evidence that the mechanism is working. Currently CDM offsets are estimated to be a $20 billion annual business with the expectation that it will grow to over $100 billion over the next four years.
However, that market where their credit are traded is anything but stable. The EU, which runs the European Union Emission Trading Scheme (EU-ETS), recently revamped its emissions reduction framework and has threatened to severely limit CER trading if a successor to the Kyoto Protocol that includeS the U.S. and China in a broader carbon trading scheme is not agreed upon. Currently the EU-ETS is the only place UN-issued CERs have any value.
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