Can project-based carbon offsets change the fate of those most vulnerable to climate change?
In May, the Clean Development Mechanism (CDM), the UN’s system for generating carbon offsets from developing country projects, celebrated its 3000thproject.
The project in question was a wind farm in the Inner Mongolia region of China: unsurprising given that since the advent of the CDM 45% of all credits generated originated in China.
A close second is India, with a 21% share of credits; then Brazil (6%) and Mexico (4%). Only 2% of credits generated to date originated in Africa.
When it was originally established, the CDM was conceived as a way not just to reduce emissions where reduction projects were cheap and plentiful, but also as a means to facilitate sustainable development for those most vulnerable to the impacts of climate change.
Development aims
Over recent years, the dominance ofrapidly industrialising nations in the global carbon offset market has led critics to question whether this aim of sustainable development is being achieved.
The European commission recognises the issue and as a consequence has restricted offset credits that can be used for compliance in the EU emissions trading scheme (EU ETS) from 2012 onwards. After that date, only credits generated from the world’s least developed countries (LDCs), and projects in other countries that have already registered pre-2012, will be accepted.
Although this ruling only applies to credits used within the EU ETS, it is likely to have a significant impact on the CDM as a whole. With no legally binding successor to the Kyoto protocol, by far the largest market for CDM credits will be installations in the EU ETS.
European governments looking to meet unilateral emissions targets could also look to apply the same criteria to their own offset purchases.
The ruling is already having an impact on investment decisions. More than half of the respondents in Point Carbon’s recent carbon market survey involved in the primary CDM market said that they have invested or will invest in offset projects in LDCs in 2011. Changes are afoot.
About time too, cry African nations and a host of other LDCs and NGOs working in them.
Rewarding failure
Some parties are less positive. Campaigners at the Gaia Foundation suggest that the lenient or non-existent application of existing environmental regulations in LDCs means the CDM will reward companies for previous environmental failure.
As evidence they cite existing examples of bad practice. In the Niger delta, an oil company is currently paid to stop its illegal gas flaring. In Durban, South Africa, a controversial toxic rubbish dump and community health hazard, which should have been closed years ago, is gaining CDM credits for generating electricity using methane from the dump as fuel.
What’s more, claims the Gaia Foundation, the CDM will exacerbate the current land-grab in Africa. CDM projects such as afforestation and biofuel plantations will require significant land. As it stands, 70% of African lands are communally owned, which makes the continent significantly vulnerable to cheap and easy privatisation, plantation of monocultures and displacement of local communities.
Then comes the issue of “additionality”: the extent to which an offset project creates emission reductions beyond a business-as-usual scenario.
Additionality risks
This issue is not unique to LDCs – in fact it has been one of the key question marks over the credibility of the CDM since its introduction. A major blow has been dealt by University of Stanford academics David Victor and Michael Wara, who have found that “at least a third and possibly up to two thirds” of offset projects do not reduce emissions to an additional degree.
For many LDCs, proving additionality is particularly difficult because baseline data is often incomplete and unreliable, and monitoring is difficult for projects in remote areas. An increase in projects in LDCs, say critics, may therefore increase risks of non-additionality.
So what are the solutions?
Some governments and NGOs, such as the Cambodian Climate Change Office and the Japan International Cooperation Agency, suggest that one route to increasing the rate of investment in offset projects in LDCs is a simplification in the rules, for example reducing the need to prove additionality.
It doesn’t take a genius to work out that if currently up to two thirds of projects are generating revenue from offsets without actually reducing net emissions, any relaxation of the rules is a backwards step.
Surely supporting LDCs to develop measurement and governance protocols is a better step. In itself this would contribute to sustainable development by building capacities and skills that will be required in order to access climate change finance via other routes.
Jane Burston is founder of Carbon Retirement.