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Discredited strategy

Patrick McCully

Readinch

Increasing allegations of corruption and profiteering are raising serious questions about the UN-run carbon-trading mechanism aimed at cutting pollution and rewarding clean technologies, writes Patrick McCully.

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The world’s biggest carbon-offset market, the Kyoto Protocol’s clean development mechanism (CDM), is run by the United Nations, administered by the World Bank and is intended to reduce emissions by rewarding developing countries that invest in clean technologies.

In fact, evidence is accumulating that it is increasing greenhouse-gas emissions behind the guise of promoting sustainable development. The misguided mechanism is handing out billions of dollars to chemical, coal and oil corporations and the developers of destructive dams -- in many cases for projects they would have built anyway.

According to David Victor, a leading carbon-trading analyst at Stanford University in the United States, as many as two-thirds of the supposed “emission reduction” credits being produced by the CDM from projects in developing countries are not backed by real reductions in pollution. Those pollution cuts that have been generated by the CDM, he argues, often have been achieved at a stunningly high cost: billions of dollars could have been saved by cutting the emissions through international funds, rather than through the CDM’s supposedly efficient market mechanism.

And when a CDM credit does represent an “emission reduction”, there is no global benefit because offsetting is a “zero sum” game. If a Chinese mine cuts its methane emissions under the CDM, there will be no global climate benefit because the polluter that buys the offset avoids the obligation to reduce its own emissions.

A CDM credit is known as a certified emission reduction (CER), and is supposed to represent one tonne of carbon dioxide not emitted to the atmosphere. Industrialised countries’ governments buy the CERs and use them to prove to the UN that they have met their obligations under Kyoto to “reduce” their emissions. Companies also can buy CERs to comply with national-level legislation or with the European Union’s emissions trading scheme (ETS). Analysts estimate that two-thirds of the emission-reduction obligations of the key developed countries that ratified Kyoto may be met through buying offsets rather than by decarbonising their economies.

Almost all the demand for CERs has come from Europe and Japan so far. In the next few years, Australia and Canada could become significant CER buyers. In the longer term, the United States could become the largest single market for CDM offsets under legislation being debated. 

Around 2 billion CERs are expected to be generated by the end of this phase of Kyoto in 2012. At their current price, project developers will sell around 18 billion British pounds’ worth (US$35 billion) of CDM credits over the next five years. The CDM approved its one-thousandth project on April 15, 2008. More than twice as many others are making their way through the approvals process.

Any type of technology other than nuclear power can apply for credits. Even new coal plants, if these can be shown to be even a marginal improvement upon existing plants, can receive offset income. A massive 4,000-megawatt coal plant on the coast of Gujarat, India, is expected soon to apply for CERs. The plant will spew into the atmosphere 26 million tonnes of carbon dioxide (CO2) per year for at least 25 years. It will be India’s third-largest -- and the world’s sixteenth-largest -- source of CO2 emissions.

Many observers had hoped that the CDM would promote renewables and energy efficiency. Yet if all projects now in the pipeline generated the CERs they are claiming up to 2012, non-hydro renewables would attract only 16% of CDM funds, and demand-side energy efficiency projects just 1%. Only 16 solar power projects -- less than 0.5% of the project pipeline -- have applied for CDM approval.

For a project to be eligible to sell offsets, it is supposed to prove that it is “additional”. “Additionality” is key to the design of the CDM. If projects would happen anyway, regardless of CDM benefits, then their offsets would not represent any reduction in emissions.

But judging additionality has turned out to be unknowable and unworkable. It can never be definitively proved that if a developer or factory owner did not get offset income they would not build their project or switch to a cleaner fuel supply -- and would not do so over the decade for which projects can sell offsets.

The documents written by carbon consultants to justify why their clients’ projects should be approved for CDM offsets contain enough lies to make a sub-prime mortgage pusher blush. One commonly used “scam” is to make a proposed project look like an economic loser on its own, but a profitable earner once offset income is factored in. Examples include Indian wind developers who failed to tell the CDM about the lucrative tax credits their projects were earning.

Off the record, industry insiders will admit that deceitful claims in CDM applications are standard practice. The carbon-trading industry lobby group, the International Emissions Trading Association (IETA), has stated that proving the intent of developers applying for the CDM “is an almost impossible task”. Industry representatives have complained that “good storytellers” can get a project approved, “while bad storytellers may fail even if the project is really additional”.

One glaring signal that many of the projects being approved by the CDM’s executive board are non-additional is that almost three-quarters of projects already were complete at the time of approval. It would seem clear that a project that is already built cannot need extra income in order to be built.

Michael Wara, a law professor and carbon-trade analyst from Stanford University, and Victor show in a recent paper that “essentially all” new hydro-, wind- and natural gas-fired projects being built in China now are applying for CDM offsets. If the developers are being truthful that their projects are additional, this implies that without the CDM virtually no hydro, wind or gas projects would be under construction in China. Given the boom in construction of power projects in China, the fact that it is government policy to promote these project types, and the fact that thousands of hydro projects have been built in China without any help from the CDM, this is simply not credible.

Additionality also creates perverse incentives for developing-country governments not to bring in, or enforce, climate-friendly legislation. Why should a government voluntarily act to cap methane from its landfills or encourage energy efficiency if, in doing so, it makes these activities “business as usual”, and so not additional and not eligible for CDM income?

The project type slated to generate the most CERs is the destruction of a gas called trifluoromethane, or HFC-23, one of the most potent greenhouse gases, and a waste product from the manufacture of a refrigerant gas. Every molecule of HFC-23 causes 11,700 times more global warming than one of CO2. Because of this massive “global warming potential”, chemical companies can earn almost twice as much from selling CERs as from selling refrigerant gases. This has spurred concern that refrigerant producers may be increasing their output solely so that they can produce, and then destroy, more waste gases.

A rapidly growing industry of carbon brokers and consultants is lobbying for the CDM to be expanded and its rules to be weakened further. If we want to sustain public support for effective global action on climate change, we cannot risk one of its central planks being a programme that is so fundamentally flawed. In the short term, the CDM must be radically reformed. In the long term it must be replaced.

Patrick McCully is executive director of International Rivers, a US think-tank.

www.guardian.co.uk
Copyright © Guardian News and Media Limited 2008

Homepage photo by am4ndas

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成功的案例

显然这个报道中没有提到中国、印度和巴西的成功案例。清洁发展机制(CDM)在被各地实践的过程中,已经产生了许多实质上的减排效果,这是值得深切关注的。没有人希望大把的花钱,却达不到减排效果。另外,中国减排使用了更多的资金,显然是因为这里有更多的减排需求。

successes?

Surely this story neglects to mention some of the success stories in China, India and Brazil? The CDM, for all it's flaws, has produced some very real emissions reductions and additionality is a serious concern. No-one wants to spend money on false reductions.

Also - surely more money is spent in China because there are more emissions to be reduced there?


循序渐进

没有什么事情能一步到位的,发稿者有没有更好的机制方案可供参考?总体来说毕竟是可再生能源项目配额比之前有很大的增加,温室气体“相对”的减少。

Step-by-step

Few things can be accomplished only by one stept.Could the author propose any better mechanisms available for reference?In general, there's larger increase in quota of renewables project than before.So the emmission of greeenhouse gas has relatively decreased.


值得探讨

事实上,CDM的发展确实存在巨大的问题,大多数项目的“额外性”(以再生能源为主)事实上不存在,但此问题的出路在哪里,还需要不断探讨。

我认为所谓的财务上的额外性至少在中国,绝大多数项目事实上行不通,但从基准线出发,无论在财务上是否额外,可再生能源事实上是取得了减排效果的,能否从这一方面探讨呢?

Robin Yan

Worthy of discussion

An enormous difficulty indeed, lies in the development of CDM, and most project "additionality" (mainly of renewable energy) does not exist in reality. What is the solution we should be relentlessly seeking? The so-called "finance additonality" I think, cannot apply to most projects, at least not in China. But if we start from the baseline, renewable energy does lead to emission reduction no matter whether it is additional or not in terms of finance. Can we begin our discussion from here? Robin Yan

translated by Ming Li


对‘值得探讨’的回应

Robin,我不能同意这一主张。有许多远比中国还穷的国家,真的无法在无清洁发展机制的支持下踏上低碳道路。称自己为可更新项目领头人的中国,正在吃掉所有的CDM资金,这样的话,会对更穷的发展中国家发生什么影响?难道中国不该对额外性采取更为负责的态度,而只是在那点钱吗?

本评论由Ming Li翻译

worthy of discussion a reply

Robin
I can't agree with this argument. There are much poorer countries than China who genuinely can't follow a low carbon path without CDM support. In China, which proclaims itself a leader in its own renewables programme is eating up all the CDM money, what happens to the poorer developing countries? Shouldn't China take a more responsible attitude towards additionality rather than just counting the cash?


值得探讨

亲爱的某人,似乎我们在讨论不同的事情,我没有提及任何其他国家CDM的情况。中国享有最大的核证减排量(CER)确是事实,但是实际上中国正在尽其最大努力通过不同方式来较少排放,不仅仅是CDM,CMD只是减排实践的一小部分。对于那些更穷的国家,有些甚至没有DNA,有些没有权威系统,那么谁能保证项目的合法性?我认为这只是CDM项目在这些国家没有普及的原因之一。我理解这些国家需要经济援助,并且他们也在尽力改善,希望将来能有更多的项目在那些国家开展。Robin
本评论由Liu Jingya翻译

worthy of discussion

Dear somebody,
Seems we are saying different things, I didn't mention anything on the CDM in other counties. It is true China has the biggest share of CERs, but in fact China is doing her best to reduce emissions through different ways, not only the CDM, which is only small part of the ER practice. For the poorer counties, some even don't have DNA, some don't have authority systems, who will ensure the project legality? I think that is also one reason why there is less CDM projects in these counties. I understand these counties need financial support, and is doing something with their effort, wish there will be more projects for them.
Robin


关于作者

他是世界水坝的领军人物之一。请一定要看他的书,他在书中提倡大坝的替代方案。

《沉默的河流:大型水坝的生态和政治》—— 帕特里克·麦卡利

about the author

He is one of the leading figures on Dams worldwide. Do read his books, he does propose alternatives.

"Silenced Rivers: The Ecology and Politics of Large Dams" - Patrick McCully


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