Will carbon credit scandals soon be behind us?

Another big verifier of carbon offsets has been suspended by the United Nations.

SGS UK, which audits clean energy projects under the carbon development mechanism (CDM) – developed under the Kyoto Protocol – has been banned from assessing the international projects, according to The Times. Another big auditor, Norway’s DNV, was suspended in late November and reinstated in February.

The Times says this will raise questions about the system whereby countries can buy credits from carbon reduction projects in the developing world to more cheaply meet their own emissions reduction targets. But it’s already widely agreed that there are problems with the CDM, and reform of the system is one of the key points up for discussion at Copenhagen in December.

What comes in for criticism most often with all offsetting – whether voluntary or UN-approved – is additionality: proving that the projects do actually result from the CDM money, and wouldn’t have been carried out anyway.

In light of this, a report from Harvard University’s Project on International Climate Agreements by Joseph Aldy and Robert Stavins suggests some changes to the CDM that might seem counter-intuitive.

Firstly, it says, there could be less emphasis on tonne-for-tonne accounting, and more emphasis on “a range of activities that could produce significant long-term benefits”.

But isn’t this throwing the concept of  additionality out the window? Aldy and Stavins say that the strict accounting approach to the CDM not only incurs high transaction costs, but misses the point: real actions by developing countries to reduce their emissions is more important than short-term targets.

They say this approach could say it would enable better transfer of funds and technology for fighting climate change to developing countries – one of the main sticking points of negotiations right now – while reducing carbon emissions in a more cost-effective way for developed countries.

The report also canvasses a broader approach than simply looking at projects (such as replacing a number of wood-burning cookers with low-emissions alternatives, or moving a whole city over to energy-saving lightbulbs). Including whole industries, they write, could capture many efforts which might otherwise be too small. And allowing policies – such as vehicle fuel-emissions standards – to be included could further stimulate investment in low-carbon technologies.

This approach, though, isn’t without its own challenges. Aldy and Stavins note: additionality challenges won’t go away and could become even more complex in an industry-wide or policy context, while rewarding developing countries for introducing emissions policies through credits could dampen enthusiasm to make policy commitments under an international framework.

Related links:

Carbon offsets: Money-saving, but difficult (FT Energy Source, 08/04/09)
Joe Romm’s fears about the CDM (The Energy Collective, 13/09/09)

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