UN Admits Carbon Emissions Trading Mechanism Needs Overhaul
While reporting a 50 percent increase in the number of projects approved under the Clean Development Mechanism (CDM), the administrators at the U.N. Framework Convention on Climate Change (UNFCCC) acknowledged that the carbon trading system requires an overhaul. This is the first time that the UNFCCC has conceded to the fact that the CDM has loopholes which need to be filled in order to make the next climate treaty a success.
CDM is a tool incorporated in the Kyoto Protocol which helps industrialized nations to meet their emissions-reduction targets through investments low-emission projects in the developing world. It has been an instrument to spread clean energy use across the world and providing monetary assistance to the developing countries to reduce their carbon emissions. But the mechanism has had its fair share of criticism.
Critics say that projects which could have been set up without any monetary help have also been incorporated in the CDM. Many other projects which pose potential environmental threat have been approved to sell carbon credits. While approving projects like wind farms for selling carbon credits it must be ensured that the ecology of the area is not going to face any adverse effects, that no trees are cut to make space for the wind mills and that the local population has no objections with the project. These aspects have been ignored so far.
If a project has been established then it should not be considered in the application process. Thorough checks and extensive studies about the ecological, environmental and socio-economic effects must be made mandatory before the any project is approved for selling carbon credits.
For instance, for a hydroelectric project, it must be check if the displaced people have been successfully relocated to new areas, what biodiversity has been lost due to the submergence of land and what are the plans initiated to replenish it and whether the company/government has any plan about managing the methane emissions generated from the project.
Companies in India and China, which sell the lion share of global carbon credits, try to find ways of convincing their respective environmental ministries which further their recommendations to the approval agencies hired by UNFCCC. Therefore, it is important that more transparency brought in the manner in which these agencies go through the procedure of approving projects.
Taking yet another example, the Delhi Metro Rail Corporation (DMRC) sells carbon credits under the CDM scheme for using the eco-friendly regenerative braking system in its trains. Now, the DMRC is one of the very few metro projects in the world which manage to generate profit so why does it require money to finance this braking system. More than half of this long-term metro project has been completed and Japan has provided a major portion of the funds but now DMRC is planning to get CDM approval for the whole project itself. The DMRC wants to get approval for selling carbon credits as commuters have shifted from buses/cars thus reducing carbon emissions.
The developed nations are least bothered as they are concerned only with meeting the set emission reduction goals while the developing countries are happy to receive practically free funding for their projects. But if transparency and responsibility is not brought into the system, this whole carbon offsetting scheme would be reduced to a mere eyewash.
Instead of monetary investments technological help should be extended to the developing and poor countries because it is difficult to keep track of the funds. Every entity involved in the process - the project managers, the company involved, the environment ministry and the approving agency - must be made accountable for its actions. We must stop fooling ourselves by selling and earning credits because in reality we have to go a very long way before the rising carbon emissions could be curtailed.
Image source: lamusa at Flickr under Creative Commons License.
Dear Mr. Chadha,
Thank you for your interest in the CDM. That said, I am struggling to find the basis for much of what you have written, including the title and opening paragraph. I would appreciate hearing from you, and I stand ready to assist in any of your future stories.
Regards,
David Abbass
Public Information Officer, CDM
Thanks for stopping by, David. I’m totally for the CDM but i believe that the whole procedure needs some refining. The story i have linked to in the first paragraph quotes the UN administrators saying the same.
I took the example of the Delhi Metro. I think the DMRC would be able to continue to use that eco-friendly braking system even if it stopping selling carbon credits from it; DMRC is making very healthy profit.
I also agree with some other criticism against the current procedure of approving projects. The Nigerian government stopped the illegal gas flaring but wants to sell carbon credits for doing so. Why should they be awarded the CDM approval for stopping something which is illegal.
Similarly, many oil companies around the world switched to efficient practices and are now selling carbon credits. We all know that oil companies have had a dream run as far as profits are concerned. Why should they be given any monetary help if they are in a financial condition to afford those technologies.
I believe CDM’s first and fore most priority should be poor nations and not the big developing nations like India, China (who have huge foreign reserves and thus no lack of funds). Plus, the projects which use only renewable sources for energy generation should be part of the mechanism, oil companies should not be the priorities.
I’m thankful for your interest in my article. I would love to hear back from you and increase my knowledge about CDM through your views.
In my perspective, CDM besides providing additional revenue to assist the project overcome the hurdle rate for investment, is also concerned in promoting new green technologies - which need promotion to increase spread. This is evident from the barrier analysis being an alternative tool to the investment analysis for evaluating additionality for CDM registration.
Illustratively, look at the MSW situation in India, the rules have been framed in 2000 by the Government, but its implementation is tardy. Now that a few projects have been registered with CDM, large number of projects are being taken for implementation in the country. It has promoted the public private partnership.
Look at another angle - waste management. There are several technologies available which need promotion, especially in the CETP area. The cycle time for acceptance of new technologies is very large, and it needs to be reduced to reduce the GHG emissions. CDM is certainly a tool for promoting for increasing the pace of acceptance of new technologies.
Energy Efficiency is another example - look at the simple example for moving from standard motors to variable frequency drives to reduce the electricity consumption. The pace has been slow. In India it is BAU now, after several years of introduction.
There are several examples. I strongly believe that DMRC is a good example of a project being registered the carbon credits.
However, I believe that projects implemented by subsidiaries of multinational companies in the developing countries should not be eligible for CDM. Since they have access to the latest technologies, alternatively their additionality assessment should be based on global practices, rather than the local practices where the project is being implemented.
I agree with you Kanwal Jit. CDM has been established precisely for the reason to states - promotion and spead of clean technologies.
You talked about public-private partnership. I believe that is the key in this whole process. Instead of providing funds to big companies, which can afford to install clean technologies on their own, priority should be given to projects which engage the public and the private sector, which help bring prosperity to the people, which do not have any adverse environmental impacts.
Approving a biomass plant, a wind farm or a waste recycling system for a village or small town in collaboration with some NGO which could integrate local people into the project thus creating jobs is far better than funding the eco-friendly braking system in the DMRC trains which can be operated even without that funding.
I totally agree with you on the public-private partnership and that multinational companies should not be approved under CDM. But my views differ from yours about the DMRC issue.
The Metro project was conceived more than 20 years ago and the Delhi government would have gone ahead with it anyway. Every city revamps its transport system in preparation for Commonwealth/Olympic Games. DMRC has got millions of dollars in funding from Japan, it is one of the only few metro services in the world that makes profits and it gets many tax waivers from the government too.
Instead of approving DMRC for selling carbon credits why not fund a small wind/solar energy project in a village which has no electricity for years and generate job opportunities for locals.
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