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Kushal Cdm

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CDM: Cheap Mechanism Clever accounting

Kushal Cdm

  1. 1. <ul><li>The ground realities of CDM </li></ul><ul><li>Centre for Science and Environment </li></ul><ul><li>New Delhi </li></ul>CDM: Cheap Mechanism Clever accounting
  2. 2. Vulnerable. Poor. Pressured. <ul><li>CDM -- Stated objectives: </li></ul><ul><ul><li>Give industrialised nations flexibility to meet emission reduction obligations by investing in clean energy projects in the South and taking climate credits in their balance sheet </li></ul></ul><ul><ul><li>Promote sustainable development in developing countries. </li></ul></ul><ul><ul><li>Invest in clean technologies </li></ul></ul><ul><ul><li>But is this happening? </li></ul></ul>
  3. 3. The Carbon market <ul><li>August 19, 2009: More than 4200 CDM projects were in the pipeline out of which 1774 were registered </li></ul><ul><li>Reductions: 2.9 billion tonnes of CO2 equivalent gases </li></ul>
  4. 8. CDM in India <ul><li>Projects in India – Till 2007 </li></ul>
  5. 9. Process: Carbon accounting <ul><li>Deals are private-private, ultra-secretive. Money from the rich in the developed countries coming to rich in developing countries </li></ul><ul><li>No real investment in clean technologies </li></ul>
  6. 10. Creative carbon accounting? <ul><li>Project design document is the base document for projects. It also involves stakeholder consultation and study of sustainability of the project </li></ul><ul><li>Therefore is unique for every project </li></ul><ul><li>But what we found looking at few India PDDs is shocking </li></ul>
  7. 11. Creative? Or Cut and Paste? <ul><li>Excerpts from official project design document : </li></ul>GFL : SRF :
  8. 12. Creative? Or Cut and Paste? Excerpts from official project design document :
  9. 13. Creative? Or Cut and Paste? Excerpts from official project design document :
  10. 14. No evaluation <ul><li>There is no mechanism by UNFCCC or the DNA (MoEF in case of India) to keep a check on the projects </li></ul><ul><li>Industry marks its own papers and there is ample scope of fudging data </li></ul>
  11. 15. Convoluted process <ul><li>The CDM market has been totally dominated by large companies, global consultants, traders and brokers </li></ul><ul><li>Transaction costs very high </li></ul><ul><li>CDM here has become a mere financial mechanism—not a measure to combat climate change </li></ul><ul><li>Its outcome has been small and cheap </li></ul>
  12. 16. The truth about markets <ul><li>CDM market has come down in the last one-year due to economic recession </li></ul><ul><li>A recent World Bank report says that overall confirmed primary CDM transaction volumes were 389 MtCO2e in 2008, down by about 30% from 2007 </li></ul><ul><li>So the money flow must be down too. NO </li></ul>
  13. 17. The truth about markets <ul><li>Strangely the global carbon market doubled to US$ 126 billion in 2008 </li></ul><ul><li>WHY? </li></ul><ul><li>Because one of the largest segment of this market is the secondary carbon market -- a market with spot, futures and options transactions -- in excess of US$26 billion representing a five-fold increase in both value and volume over 2007 </li></ul>
  14. 18. The truth about markets <ul><li>World Bank report admits that -- These trades do not directly give rise to emission reductions unlike transactions in the primary market </li></ul><ul><li>Clearly means that money is being made on carbon credits without real reduction happening and that somebody else is making money by trading credits and not the developing countries, who were supposed to be the real beneficiaries </li></ul>
  15. 19. Who is buying?
  16. 20. Outsourcing reductions <ul><li>The 15 EU states as a group committed themselves to reducing emissions 8% below 1990 levels </li></ul><ul><li>In the 2008 forecast, the group assumed that, by 2010, 3 per cent of the 8 per cent reduction – or, more than a third – would be achieved through the “application of the Kyoto mechanisms” </li></ul><ul><li>Another 1.4 per cent would come from forest sinks. Meaning? </li></ul>
  17. 21. Outsourcing reductions <ul><li>EU is not leading anybody, as is often projected, in meeting Kyoto targets </li></ul><ul><li>60 per cent of Kyoto I reduction target of the European Union would be met by buying cheap and dirty carbon credits </li></ul>
  18. 23. Outsourcing reductions <ul><li>Even in its newly announced targets for phase II EU allows 66% reductions through offsets in developing countries </li></ul><ul><li>Most other developed countries, which have announced reduction targets or are in the process of doing so, are also depending on cheap offsets. </li></ul>
  19. 24. Outsourcing reductions <ul><li>What is shocking is that for some countries this figure more than is 100% </li></ul><ul><li>Take the case of Luxembourg </li></ul>
  20. 25. Luxembourg: 100% outsourced <ul><li>Luxembourg has one of the highest per capita emissions in the world – 26.8 tonnes of CO2 equivalent per capita, even more than the US </li></ul><ul><li>Under the Kyoto protocol it has an individual reduction target of 28 per cent below 1990 levels </li></ul>
  21. 26. Luxembourg: 100% outsourced <ul><li>But the country has conceded that its target of a 28 per cent emissions reduction would not be achieved </li></ul><ul><li>Average emissions for the years 2008 - 2012 is actually expected to be 3 per cent above the 1990 base year level </li></ul><ul><li>This would mean that Luxembourg would have to actually decrease its emissions by 31 per cent to meet the Kyoto target </li></ul>
  22. 27. Luxembourg: 100% outsourced <ul><li>As per current information the country plans to reduce 30 per cent through offsets while domestic actions will only reduce 1% </li></ul><ul><li>This means that Luxembourg is meeting 100% of its Kyoto obligations by offsetting </li></ul><ul><li>Not only that, 66% of the increased emissions over 1990 levels will also be offset </li></ul><ul><li>Talk about Kyoto compliance </li></ul>
  23. 28. Luxembourg: 100% outsourced <ul><li>This is clearly contrary to the article 6. (d) of the Kyoto Protocol, which states the purchase of emission rights shall only be “supplemental” to domestic measures </li></ul>
  24. 29. Luxembourg: 100% outsourced <ul><li>Behind this lies an economic calculation that these credits can be purchased abroad more cheaply than domestic reductions </li></ul><ul><li>Is it in our interest to sell of our reductions options so cheaply? </li></ul>
  25. 30. Reforms: The way ahead <ul><li>Additionality: The most ludicrous aspects of the current CDM regime </li></ul><ul><li>A project is considered additional, if it would not have happened without CDM support </li></ul><ul><li>But it is flawed in its very concept. Why? </li></ul>
  26. 31. Reforms: The way ahead <ul><li>Because if a government takes a low-carbon policy option for projects it will not qualify as ‘additional’. Policies are not considered additional </li></ul><ul><li>Take the instance of public transport </li></ul><ul><li>Tough measures to promote public transport in our cities would ensure reduction in vehicular emissions – a major contributor </li></ul>
  27. 32. Reforms: The way ahead <ul><li>But under the current regime it will be non-additional or ‘business-as-usual’ </li></ul><ul><li>This highly twisted and knotty yardstick has become a barrier for effective projects </li></ul><ul><li>CDM has become a perverse incentive for developed world to keep polluting as long they can buy cheap offsets </li></ul>
  28. 33. Reforms: The way ahead <ul><li>This must change </li></ul><ul><li>CDM should pay for high-end, leap fron technologies. It should pay for transition from biomass to solar energy </li></ul><ul><li>The biggest barrier is cost: IPCC’S fourth assessment report concluded that carbon price of US $50-100 on a tonne of CO2 equivalent is needed to make deep emissions cuts – not the current US $5-15 </li></ul>
  29. 34. Reforms: The way ahead <ul><li>To start with a minimum price of US$ 50 is must per tonne of CO2 </li></ul><ul><li>The will to pay this price will be critical to getting the low-carbon technologies </li></ul><ul><li>Else the process is bound to fail </li></ul>
  • elisal72

    Jul. 21, 2020

CDM: Cheap Mechanism Clever accounting


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