Last week, the clean development mechanism registered its 7,000th project. At a first glance, the statistics look impressive. Over a 10 year period, the CDM has issued 1.3 billion carbon credits, added 110,000 Mega Watts of renewable energy and seen US$215 billion invested in low carbon projects in the Global South.
But the CDM has not reduced greenhouse emissions at all, because every carbon credit produced through the CDM results in an increase in emissions somewhere else. The Chair of the CDM Executive Board, Peer Stiansen, either does not understand this simple fact, or he is attempting to mislead the public. In a press release about the 7,000th CDM project, Stiansen explains that,
“Despite unfavourable market conditions, the CDM continues to provide a mechanism for real emission reductions and real sustainable development for those who wish to use it. The Board will continue its efforts to make the CDM the best tool it can be to reduce emissions and spur development, but Parties must do their part and set ambitious emission reduction targets to incentivize climate action and these types of green growth projects.”
The CDM is not a tool to reduce emissions. Writing seven years ago in The Guardian, George Monbiot pointed out that no matter how successful on its own terms the CDM is, it cannot address climate change:
Even if, through carbon offset schemes carried out in developing countries, every poor nation on the planet became carbon-free, we would still have to cut most of the carbon we produce at home. Buying and selling carbon offsets is like pushing the food around on your plate to create the impression that you have eaten it.
The “unfavourable market conditions” that Stiansen refers to, are to a large extent the result of the economic crisis, especially in Europe, which is where the biggest market for CDM credits is. With manufacturing down, emissions are down and the demand for carbon credits is down. Combined with a massive over-supply of credits, this has resulted in very cheap CDM carbon credits: currently selling for around 50 euro cents ($0.64). In its press release, the CDM notes that over the past 12 months, the price fell by 90%. In fact, it’s been falling since 2008, as this graph from a recent World Bank report illustrates:
Michael Szabo, a journalist with Reuters Point Carbon, points out that the figure 7,000 CDM projects is “increasingly irrelevant”, because of “warnings of ‘zombie projects’ and more companies pulling out of the struggling scheme”. The phrase “zombie projects” comes from Stefan Winter, deputy head of certification at CDM auditors TÜV NORD. The price of CDM carbon credits (certified emissions reductions, or CERs) is so low, that some project owners have stopped participating in the CDM despite being registered under the scheme.
Szabo quotes Alexandre Kossoy, senior financial specialist at the World Bank’s Carbon Finance Unit, as acknowledging the problem. But despite the Bank’s vast resources and 200 staff working on carbon trading, it would be too much effort for the Bank to find out the scale of the problem. Kossoy says that,
“It’s not surprising. We knew about it but … we haven’t measured how many because it would take months to go project by project.”
The CDM’s Peer Stiansen also acknowledges the problem, but also appears reluctant to do anything about it:
“We don’t deny that this is happening to a number of projects but this is an issue related to demand, and that is out of our hands.”
Szabo notes that these zombie projects challenge the principle of “additionality” in the CDM. Of the 7,000 projects registered under the CDM only 2,400 have applied for carbon credits. Of those projects, 25% have not been issued with any carbon credits in the past year.
Szabo’s article ends with a surprising admission from the World Bank’s Alexandre Kossoy. In effect, Kossoy admits that many CDM projects are not additional:
[Kossoy] said that many CO2-cutting projects registered under the CDM “will survive without it” as they have other sources of revenue, for example from selling power.
But this appeared to contradict one of the guiding principles of the CDM – that projects should not be approved if they are not “additional”, or in other words they are viable without the proceeds from selling carbon credits.
“For most, getting (credits) is the cherry on top of the cake,” Kossoy added.