Yesterday, The Guardian’s environment editor John Vidal reported on two new studies that show 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) is “being routinely abused by chemical, wind, gas and hydro companies.” Vidal writes:
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.
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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.
The ability of European companies to buy carbon offsets on the world “market” is a key reason why the EU cap and trade system has been a complete failure. The Warner-Lieberman cap and trade bill, set for debate next week, also allows US companies to buy as much as 15% of their needed carbon credits from the world “market.”
Since virtually all economic activity produces some carbon, any effective cap and trade system would require legions of skilled technicians to monitor carbon reductions. These technicians simply do not currently exist. Without the monitoring necessary to make sure carbon credit benefits are actually being produced, any cap and trade system will ultimately prove ineffective as unverifiable projects flood carbon credit demand with unverifiable supply. The only winners of a cap and trade system will be the lobbyists in Washington who rake in millions finding loopholes for their energy company clients, cynical marketers intent on greenwashing, and deal-happy Wall Streeters looking for a shiny new billion-dollar trading toy.
How can big money be made/spent on a non-existing commodity
As the author of the essay which sparked John Vidal to write his news story I'd like to add a couple of comments. First, this blog entry seems to confuse cap-and-trade and baseline-and-offset/credit trading (the CDM is of the latter type). Baseline-and-offset systems are inherently prone to gaming because they are based on a non-existent commodity ("emission reductions"). Cap-and-trade systems are based on allowances, not credits, and are based on an actual physical reality (i.e. emisisons). Allowing baseline-and-offset credits/offsets into cap-and-trade systems is a very bad idea, but it is not an inherent problem of cap-and-trade. It would be very easy to have cap-and-trade without offsets – something which no doubt the Heritage Foundation, with its apparent concern for the effectiveness of action on global warming, will push for.
Patrick McCully
Executive Director
International Rivers
Patrick –
If you had a cap-and-trade system without offsets, wouldn't it be more accurately characterized simply as a "cap" system? In turn with that line of thinking, what makes the cap (emission allowances) any less arbitrary than the baseline (emission reductions)? Are they still not figures that are arrived at by a governing board not connected with the industry? And is this not line of inquiry relatively moot since the cap-and-trade system proposed does in fact contain offsets?
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