Monday, June 9, 2008

The great carbon bazaar

By Mark Gregory Business correspondent, BBC World Service, India

Evidence of serious flaws in the multi-billion dollar global market for carbon credits has been uncovered by a BBC World Service investigation. The credits are generated by a United Nations-run scheme called the Clean Development Mechanism (CDM).
The mechanism gives firms in developing countries financial incentives to cut greenhouse gas emissions. But in some cases, carbon credits are paid to projects that would have been realized without external funding.

The BBC World Service investigation found examples of projects in India where this appeared to be the case. Arguably, this defeats the whole point of the CDM scheme, set up under the Kyoto climate change protocol, as these projects are getting money for nothing. The findings reinforce doubts that the CDM is leading to real emission cuts, which is not good news for the effort to combat climate change. (Link)

Commentary:

The Kyoto Protocol has been the world’s most ambitious effort to combat global warming and unfortunately it has been a dismal failure. The Kyoto Protocol was adopted in 1997 by the United Nations Framework on Climate change and since then 187 countries have ratified the treaty but not the United States.

The Kyoto treaty requires each industrialized county that is a party to the treaty to reduce greenhouse gas emissions to a level specified for each of them. Collectively they must reduce their greenhouse emissions to 5% less than the 1990 level of emission. While some countries are on track to reduce their emissions to their treaty obligated level, many others are not and with China and India exempt from emission reduction requirements, greenhouse gas emissions continue to rise.

Unfortunately even for some of those countries that are meeting their treaty obligations on-paper, their is reason to doubt that they are in actuality having any impact on greenhouse gas emissions. That is because many of them are meeting their reduction level by purchasing carbon offsets.

The logic of this ability to purchase offsets, is that whether you reduce emissions in your own country or you help another country reduce their emissions, the effect is the same. Unfortunately, the Clean Development Mechanism has been riddled with scandal. If you will read the above article, it gives examples of how the program is working in reality.

Carbon offsets sound good in theory. In practice most carbon offsets, whether the foreign CDM offsets or private sector carbon offsets, are a shell game, a scam and a con.

When Congress was debating the recently defeated Cap and Trade legislation, Senator Bob Corker offered an amendment that would delete foreign offsets from the bill. Unless there is a major reform of the CDM, then any American Cap and Trade system must not allow foreign offsets. Before the US considers ratifying Kyoto, the CDM must be reformed.

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