Billions wasted on UN climate programme

http://www.guardian.co.uk/environment/2008/may/26/climatechange.greenpolitics

Billions wasted on UN climate programme

Energy firms routinely abusing carbon offset fund, US studies claim

John Vidal, environment editor
The Guardian, Monday May 26 2008 Article history

Billions of pounds are being wasted in paying industries in developing countries
to reduce climate change emissions, according to two analyses of the UN's carbon
offsetting programme.

Leading academics and watchdog groups allege that the UN's main offset fund is
being routinely abused by chemical, wind, gas and hydro companies who are
claiming emission reduction credits for projects that should not qualify. The
result is that no genuine pollution cuts are being made, undermining assurances
by the UK government and others that carbon markets are dramatically reducing
greenhouse gases, the researchers say.

The criticism centres on the UN's clean development mechanism (CDM), an
international system established by the Kyoto process that allows rich countries
to meet emissions targets by funding clean energy projects in developing nations.

Credits from the project are being bought by European companies and governments
who are unable to meet their carbon reduction targets.

The market for CDM credits is growing fast. At present it is worth nearly $20bn
a year, but this is expected to grow to over $100bn within four years. More than
1,000 projects have so far been approved, and 2,000 more are making their way
through the process.

A working paper from two senior Stanford University academics examined more than
3,000 projects applying for or already granted up to $10bn of credits from the
UN's CDM funds over the next four years, and concluded that the majority should
not be considered for assistance. "They would be built anyway," says David
Victor, law professor at the Californian university. "It looks like between one
and two thirds of all the total CDM offsets do not represent actual emission cuts."

Governments consider that CDM is vital to reducing global emissions under the
terms of the Kyoto treaty. To earn credits under the mechanism, emission
reductions must be in addition to those that would have taken place without the
project. But critics argue this "additionality" is impossible to prove and open
to abuse. The Stanford paper, by Victor and his colleague Michael Wara, found
that nearly every new hydro, wind and natural gas-fired plant expected to be
built in China in the next four years is applying for CDM credits, even though
it is Chinese policy to encourage these industries.

"Traders are finding ways of gaining credits that they would never have had
before. You will never know accurately, but rich countries are clearly
overpaying by a massive amount," said Victor.

A separate study published this week by US watchdog group International Rivers
argues that nearly three quarters of all registered CDM projects were complete
at the time of approval, suggesting that CDM money was not needed to finance them.

"It would seem clear that a project that is already built cannot need extra
income in order to be built," said Patrick McCully, director of the thinktank in
California. "Judging additionality has turned out to be unknowable and
unworkable. It can never be proved definitively that if a developer or factory
owner did not get offset income they would not build their project."

Yesterday a spokesman for the CDM in Bonn said the fund was significantly
cutting emissions and providing incentives for companies to employ clean
technologies: "There is a responsible level of scrutiny. The process is in
continual reform. All the projects are vetted independently and are then
certified by third parties. There are many checks and balances and we can show
how all projects are vetted."

The UK government last night defended the CDM. "We completely reject any
assertions that [it] is fundamentally flawed," a spokeswoman said. "We've worked
consistently for and seen improvement in CDM processes over the past few years
of its operation. We believe the CDM is essentially transparent and robust,
though we will continue to press for the environmental integrity of projects."
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