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May 26, 2008 / Mridul

UN Carbon Offset Program Requires Cleanup

Two Stanford University academics have found in their study that a significant number of projects in the developing countries are earning huge amounts of cash on the back of hollow promises of cutting back on their carbon emissions. The study reveals what are described as ‘routine abuses’ of the UN Carbon Offset Program.

According to the paper prepared by the academics, the projects which earn the money by selling carbon credits to companies in the developed nations (mainly Europe & North America) actually don’t necessarily require that money in order to grow. They also point out the discrepancies in the method of certifying projects as ‘eligible’ to sell carbon credits. This is seen as a big blow to the global carbon credit business which by some estimates could grow into a $3 trillion dollar market by 2020.

Although the main idea behind the program seems salutary since it has been able to avoid confrontations between the developed and developing nations over who would bare the economic costs of reducing the carbon emissions but it has become a tool for the growth hungry companies of the developing nations to show that they are trying to reduce their carbon emissions.

Companies, especially in India and China, have managed to work their way around the Clean Development Mechanism which allows them to acquire fundings for their projects from the more polluting companies in the developed world by projecting them as clean energy projects. These include many coal-based power generation companies, gas liqufication plants and the supposed ‘clean coal’ plants. Most of these companies start pilot projects based on new technologies which promise to reduce carbon emissions.

The problem with the Clean Development Mechanism that while looking to help the big emitters cleanup for their extra emissions and promoting renewable energy initiatives, it indirectly supports these companies to remain trapped in the ‘dirty energy’ cycle. If these pilot projects, which still involve the use of coal and natural gas, are being continuously financed by the polluting industries of the west then how could we expect that one day in the near future they would abandon their projects for the ‘real clean energy’.

By financing such initiatives we are only encouraging these companies to stay in the ‘fossil fuel mode’ which is actually the very cause of the rising greenhouse gas emissions. Such lapses in the CDM are actually turning the pollutants into sources of easy money for these companies. The UN, although, defends itself claiming that care has been taken in protecting the CDM from any abuses.

Companies in the developed world would keep buying carbon credits to show that they are working to reducing their GHG emissions while they keep up their production and the companies in the developing countries would happily setup pilot projects to show their efforts for combating their rising emissions. Thus both, the developed and the developing nations would avoid arguments about the adverse effects on their respective economies but the net result wouldn’t be the one the UN envisaged.

A refinement of the CDM regulations is required. The CDM must fully satisfy itself that a particular project would really reduce emissions not only in the short term but also in the longer term. Projects based on the renewable energy and efforts for afforestation should be given the highest priority and should be made a benchmark for others to follow.

The CDM could work efficiently it just needs a slight course correction. Promotion of renewable and clean energy should be its goal and it should also show in its actions (and transactions).

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