Billionth carbon credit issued

THE clean development mechanism (CDM)—the world’s largest carbon offset mechanism under the Kyoto Protocol—has issued its billionth carbon credit. It was given to a company in Alwar, Rajasthan, which switched its fuel source from coal to biomass. Each credit, also called certified emission reduction (CER), translates to avoidance of emission of one tonne of CO2 (a greenhouse gas) resulting from projects in developing countries funded by developed countries. This effectively means that a billion tonnes of CO2 has been avoided since the first CER was issued in 2005.

The milestone comes at a time when prices of carbon credits are at a record low and do not bode well for CDM projects. The role of CDM itself in a future climate change regime remains uncertain. Pradipto Ghosh, member of a panel constituted by the CDM executive board to take stock of the process, says, “When CDM was conceptualised, it was not expected to be so large.” The billionth CER has shown that CDM has realised its scope, he says, adding, “CDM has put in place many projects that have benefitted many communities.” Critics, however, say CDM has delivered on quantity, not quality. A constant complaint about CDM projects is that they have failed to meet the criteria for sustainable development.

To respond to such criticism, a high-level panel was convened by the CDM executive board to give recommendations on ways to reform the mechanism. The panel’s final report, recently released in Bangkok, was expected to offer ways to ensure that CERs of poor quality do not reach the market. Instead, the report focuses on saving the ailing CDM market. Samantha Smith of WWF says some of the recommendations focus more on saving CDM and keeping carbon prices up than on bringing emissions down through offsets. The biggest problem with the UN climate negotiations and the carbon market “is not whether we have a perfect offsetting scheme. It is the failure of governments to cut emissions at the speed and scale that is needed. If they did that, carbon prices would go up, but we would be on track for a cleaner and safer future,” she adds.

Ghosh concurs. “The low prices of CERs are primarily owing to lack of demand from Annex-I (developed) countries. They have collapsed so low that it makes it impossible for developing countries to further invest in CDM projects.” To address the issue of low carbon prices, the report recommends that all countries should increase their targets under the Protocol. It also says to unlock the full potential of CDM, all countries must be enabled to use CERs. According to Delhi non-profit Centre for Science and Environment (CSE), this recommendation is “dangerous and disturbing”. By asking all countries to increase their mitigation ambition, the panel has disregarded reports that show developing countries are performing better than developed countries, it says. The report has removed the distinction between developed and developing countries by asking developing countries to use carbon credits to meet their voluntary pledges. Chandra Bhushan, deputy director general of CSE, says, “This seeks to rewrite the international convention on climate change by destroying the very concept of equity embedded in it.”

To improve sustainability reporting of CDM projects, the panel recommends that the impacts should be reported, monitored, and verified throughout the lifetime of a project in a “more systematic and rigorous manner”. CSE says this recommendation is a superficial attempt to placate the civil society. “If the panel had truly internalised the experiences with environmentally destructive projects that were given CERs, it should have prevented such projects, which it failed to do.” Eva Filzmoser, director of CDM Watch, a Brussels-based watchdog, says, “In the absence of strict rules that ensure sustainable projects, it does not make sense to save CDM for its own sake. Much larger emission reductions can be achieved directly by supporting new and effective climate policies.”

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