The world’s biggest carbon offset market, the Kyoto Protocol’s clean development mechanism (CDM), is run by the UN, administered by the World Bank and is intended to reduce emissions by rewarding developing countries that invest in clean technologies. In fact, evidence is accumulating that it is increasing greenhouse gas emissions behind the guise of promoting sustainable development. The misguided mechanism is handing out billions of dollars to chemical, coal and oil corporations and the developers of destructive dams — in many cases for projects they would have built anyway.
According to David Victor, a leading carbon trading analyst at Stanford University in the US, as many as two-thirds of the supposed “emission reduction” credits being produced by the CDM from projects in developing countries are not backed by real reductions in pollution. Those pollution cuts that have been generated by the CDM, he argues, have often been achieved at a stunningly high cost: billions of pounds could have been saved by cutting the emissions through international funds, rather than through the CDM’s supposedly efficient market mechanism.
And when a CDM credit does represent an “emission reduction,” there is no global benefit because offsetting is a “zero sum” game. If a Chinese mine cuts its methane emissions under the CDM, there will be no global climate benefit because the polluter that buys the offset avoids the obligation to reduce its own emissions.
A CDM credit is known as a certified emission reduction (CER), and is supposed to represent 1 tonne of carbon dioxide not emitted to the atmosphere. Industrialized countries’ governments buy the CERs and use them to prove to the UN that they have met their obligations under Kyoto to “reduce” their emissions. Companies can also buy CERs to comply with national-level legislation or with the EU’s emissions trading scheme. Analysts estimate that two-thirds of the emission reduction obligations of the key developed countries that ratified Kyoto may be met through buying offsets rather than by decarbonizing their economies.
Almost all the demand for CERs has so far come from Europe and Japan. In the next few years, Australia and Canada could become significant CER buyers. In the longer term, the US could become the largest single market for CDM offsets under legislation being debated. The climate plan by Republican presidential hopeful John McCain would allow supposed emission reductions in the US to be met through domestic and CDM offsets.
About 2 billion CERs are expected to be generated by the end of this phase of Kyoto in 2012. At their current price, project developers will sell around US$36 billion in CDM credits over the next five years. The CDM approved its 1,000th project on April 15. More than twice as many are making their way through the approvals process.
Any type of technology other than nuclear power can apply for credits. Even new coal plants, if these can be shown to be even a marginal improvement upon existing plants, can receive offset income. A massive 4,000MW coal plant on the coast of Gujarat, India, is expected soon to apply for CERs. The plant will spew into the atmosphere 26 million tonnes of CO2 per year for at least 25 years. It will be India’s third — and the world’s 16th — largest source of CO2 emissions.