in China, Indonesia

Another reason why a REDD carbon trading mechanism does not add up

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Another reason why a REDD carbon trading mechanism does not add up

Yesterday, ABN interviewed the Chair of the Clean Development Mechanism Executive Board, Martin Hession. The interview included a very interesting question, which is very relevant to REDD and whether REDD is to be financed by carbon trading.

If REDD is to be a carbon trading mechanism, the emissions reduced will not be counted in the country where the reductions take place. Instead they will be sold as carbon credits and used to allow pollution to continue elsewhere. Otherwise, the reductions in emissions will be double counted.

In a country like Indonesia, this has serious implications. In 2009, Indonesia’s president, Susilo Bambang Yudhoyono set a target of 26% emissions reductions against business as usual by 2020. With international support the figure would be 41%.

“This target is entirely achievable because most of our emissions come from forest-related issues, such as forest fires and deforestation,” Yudhoyono said. But if REDD in Indonesia generates carbon credits, these will be sold overseas and will therefore not count towards the Indonesian President’s target.

Here is the question to Martin Hession and his answer (although from his answer, he appears not to have understood the question):

ABN: One of the big concerns raised by big emitters like China and Brazil is that they aren’t able to benefit from CDM projects being hosted in their country as you obviously can’t double count these carbon credits, they are having to sell these carbon credits to EU countries, Annex I countries. What is your view on these concerns?

Martin Hession: Well, I think between the buyer and seller there’s always going to be a mutual benefit. Plainly there is investment from the developed world to China, India and Brazil, so that’s a flow of capital which is useful and obviously the developed countries get the benefit because they reduce the costs of doing their emissions reductions. So I would say it’s kind of a mutual relationship. Obviously those countries can talk about improving that, but under the CDM I think it’s fair. I know that China for instance has managed to capture some of the profits from the projects in a tax, which they dedicate to sustainable development and other countries have different policies on how they use the revenues.

Watch the interview here:

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  1. The target is to reduce emissions, the fact that they may or may not be sold as credits is not material. What may be an issue is when the government sets aside a piece of land such as making it a protected area, or some how limiting its use to reduce emissions, as part of the 26% reduction in emissions plan may disallow it for the purposes of credits.

  2. @Philip Wells

    Sorry, I do not understand your comment “The target is to reduce emissions, the fact that they may or may not be sold as credits is not material” – which strikes me as being oxymoronic: if the purpose is to sell them as credits then it has a profoundly material effect on whether they reduce emissions, because being sold as credits means, by definition, that the same amount of pollution carries on being emitted elsewhere – and hence the net effect is zero reduction in emissions.

    CDM or REDD credits can’t be counted against targets in both the ‘producer’ country and the ‘importer’ country, and surely the point about this article is that even the head of the CDM Executive Board does not seem to have understood the risk of double-counting of emissions trading initiatives. This is a problem which effects not only the CDM structure, but also, inherently, REDD if it is based on carbon trading. As I understand it, after some four years of intensive discussions about REDD, none of the negotiators in the UNFCCC have, in their infinite wisdom, seen fit to address this major problem.

    I suppose it can only be considered to be a huge victory for the brazen audacity of rich country governments that, by convincing poor countries to sell them cheap REDD credits, they have in effect reduced their own abatement costs, whilst leaving developing countries such as Indonesia with no option but to make the more expensive changes (such as reducing emissions from coal-fired powered stations) in order to meet their own targets – ie, precisely the changes which the rich countries are declining to make.

    That poor country governments have so willingly gone along with this ruse is no doubt also testament to their own short-sightedness and, in some countries, outright mercenary approach to international environmental issues – having put their own short-term interests well above those of their people who will pay the consequences for this monumental error of judgement.

  3. The double counting issue is serious.

    Article 4.7 of the Convention (see below) gives REDD countries a good reason to count any “reductions” from REDD towards their own targets: their mitigation measures are supposed to be financed by Annex I. In fact, Brazil in its submission on its national 2020 target following Copenhagen explicitly stated that reductions from CDM projects will be INCLUDED (http://unfccc.int/files/meetings/cop_15/copenhagen_accord/application/pdf/brazilcphaccord_app2.pdf), so they are getting counted twice for sure.

    Any CDM-like setup will mean that Annex-I countries will be counting it towards their targets as well – unless double counting is raised as an issue and measures to address them are put in place. But at current state of play ambition is so low anyway that it is almost pointless to bring up further issues. We need a clear zero fossils target and start talking about which fossil fuels will stay in the ground and which ones are to be extracted and used as an investment. Demand side mitigation is failing us, so we must start focussing on the supply side.

    best wishes,

    Kjell

    UNFCCC – Article 4 – COMMITMENTS
    7. The extent to which developing country Parties will effectively implement their commitments under the Convention will depend on the effective implementation by developed country Parties of their commitments under the Convention related to financial resources and transfer of technology and will take fully into account that economic and social development and poverty eradication are the first and overriding priorities of the developing country Parties.

  4. A very interesting discussion.

    What currently happens in national accounting in CDM producer countries?

    For example, do China and India reduce their emissions volumes in national accounting for the UNFCCC, based on reductions from, say HFC-23 destruction paid for through the CDM? And if so, do the countries which buy those credits also do the same?

    If so, double counting has been going on for years.

    Does anyone know this?