CDM Policy Dialogue Report inadequate
Narendra Ch | 14 Sep 2012

CDM has not just been ineffective; it is also a case of carbon accountancy fraud, a 'cheap development mechanism' promoting cheap offsets. A large amount of CDM credits are being generated from business-as-usual fossil fuel and industrial projects. Its flawed design has failed to deliver on what was really needed -- transformational leapfrogging to clean technology in developing countries.

The recommendations outlined in the recently released Clean Development Mechanism (CDM) Policy Dialogue Report are completely inadequate to achieve the much-needed real reforms in CDM: says Centre for Science and Environment (CSE) in a critique of the Report.

The Report of the high-level panel, authored by a group of 11 members from across the world, was released at the 69th CDM Executive Board meeting held in Bangkok on September 11, 2012. It is the final outcome of a year-long process whose aim was to recommend how to reform the CDM design and process, and to envision a way forward to prevent the global carbon market from disintegrating. Various stakeholders such as civil society, policymakers and market participants were involved in the deliberations.

Says Sunita Narain, Director General, CSE: “The report is singularly geared towards saving the ailing CDM and carbon markets, with not enough focus on how the social and environmental integrity of the mechanism should be addressed.”

CDM: merely a ‘cheap’ development mechanism, CDM was crafted under the Kyoto Protocol to primarily serve two purposes -- to help developed countries to meet their commitments under the Protocol in a cost-effective manner, and to support sustainable development activities in developing countries.

But it has rapidly degenerated into being just a market tool used by the Kyoto parties to write off their targets with cheap offsets. It has failed to deliver the real reduction in emissions that were needed to effectively address climate change and promote sustainable development in developing countries.

CSE researchers point out that CDM has not just been ineffective; it is also a case of carbon accountancy fraud, a ‘cheap development mechanism’ promoting cheap offsets. A large amount of CDM credits are being generated from business-as-usual fossil fuel and industrial projects. Its flawed design has failed to deliver on what was really needed -- transformational leapfrogging to clean technology in developing countries.

‘Dangerous and disturbing’ recommendations

The CDM Policy Dialogue Report has a long list of recommendations – 51 to be exact. The focus of the recommendations are to save the carbon market by increasing the demand and price of carbon credits. To do this, the panel wants every country – developed as well as developing -- to increase their mitigation ambition and use carbon credits to meet their targets. These recommendations are akin to rewriting the international climate convention and removing the distinction between developed and developing countries.

Under the convention, only those developed countries that are signatories to the Kyoto Protocol have legally binding mitigation targets, and they can use the benefits of carbon credits to meet their targets. The panel’s recommendation of allowing all developed countries to have access to carbon offsets is actually rewarding the defaulters of Kyoto Protocol.

On one hand, it is going to reward countries like the US which have not signed on to the Protocol; on the other, it is rewarding countries like Canada which have not met their first commitment and have now walked off from the second commitment as well.

By asking all countries to increase their mitigation ambition, the panel has disregarded all reports that indicate that currently, developing countries are doing much more than developed countries to reduce carbon emissions. By asking developing countries to use carbon credits to meet their voluntary pledges, the report has removed the distinction between the developed and the developing countries – a recommendation which CSE says is “dangerous and disturbing.”

According to Chandra Bhushan, CSE Deputy Director General and head of its climate change unit, “This seeks to rewrite the international convention on climate change by destroying the very concept of equity and CBDR embedded in it.” He says that a more effective way to approach this would be to ask developed countries to increase their current mitigation targets and step up their efforts to match those required by climate science.

Many of the recommendations send contradictory messages. For example, the report recommends increasing/stabilising the price of carbon credits on one hand. On the other hand, it supports carbon credits resulting from forestry projects (such as REDD) and carbon capture and storage (CCS) which typically tend to oversupply the market. CSE suggests that use of cheap and non-transformational technology to generate carbon credits should be avoided.

The report strongly suggests the linking of carbon markets and increasing the reach and scope of CDM by including forestry projects (REDD) in it. Without ensuring the right rules and safeguards in place, this could endanger the livelihoods of indigenous communities and forest dwellers by making our forests a carbon dump yard for developed countries, warns CSE. Instead, REDD should be addressed through non-market mechanisms by involving the local communities.

Sustainable development, a key mandate of CDM, has been superficially addressed to placate the civil society. The Report has failed to internalise the experiences of environmentally destructive projects that have been awarded carbon credits in the past. Instead of removing those categories of projects from getting carbon credits in future, the recommendation is only to improve the process of assessment of projects on sustainable development and to “report, monitor, and verify sustainable development impacts in a more systematic and rigorous manner.”

If the host government doesn’t have the capacity to do this assessment, then the report recommends that the “CDM Executive Board could designate an appropriate and mutually acceptable independent authority to do so, and should also help national authorities to develop such capacity.” CSE wonders if the “independent authority” is going to be the same private international consultants that have compromised the integrity of the entire CDM mechanism.

Says Chandra Bhushan: “The recommendations in the report are not inclusive and representative of the opinions generated during the public stakeholder consultation process. Many major suggestions, including those that protect the interests and rights of communities impacted by CDM projects and strengthening the accountability of private international consultants, have clearly not been taken into account. Instead, the bias lies towards the voices and interests expressed by those from the private sector.”

CSE, however, supports the idea of greater representation of least developing countries that have not accessed the benefits of CDM projects so far. However, it also warns that if cheap credits remain the focus of the CDM market, these countries will not be able to access the benefits as their projects are likely to be small and will not be able to compete with large projects which can supply carbon credits at much lower prices.

CSE instead advocates adapting a ‘gold standard’ and a benchmark price for small projects from developing countries. The standard would be a mechanism to rate, value and price projects in terms of additional social and economic benefits -- not just reductions in GHG emissions. There could be a minimum percentage of credits from ‘gold standard’ that each party can be mandated to purchase to offset their targets.

The report recommends the need for professional experts in the CDM Executive Board. While this is needed, it is more important to make sure that regional balance prevails even within the professional and experienced members of the Board.

CSE has urged the Indian government to reject these recommendations. Says Sunita Narain, “the recommendations are not only bad for the developing countries, they will also negate global efforts for fighting climate change.”