Clean Development Mechanism
The CDM, defined in Article 12 of the Protocol, was intended to assist non-Annex I countries (predominantly developing nations) achieve sustainable development and reduce their carbon footprints, and to assist Annex I countries (predominantly industrialized nations) achieve compliance with greenhouse gas emissions reduction commitments.
The flexibility mechanisms were designed to allow Annex B countries to meet their emission reduction commitments with reduced impact on their economies.
The initial years of operation yielded fewer CDM credits than hoped for, which was partially ascribed to the underfunded and understaffed oversight bodies.
[14] Infrastructure decisions made in developing countries could therefore have a very large influence on future efforts to limit total global emissions (Fisher et al., 2007).
The case is then validated by a third party agency, called a Designated Operational Entity (DOE), to ensure the project results in real, measurable, and long-term emission reductions.
If a project is registered and implemented, the EB issues credits, called Certified Emission Reductions (CERs, commonly known as carbon credits, where each unit is equivalent to the reduction of one tonne of CO2e, e.g. CO2 or its equivalent), to project participants based on the monitored difference between the baseline and the actual emissions, verified by the DOE.
The partners involved in the project could have an interest in establishing a baseline with high emissions, which would yield a risk of awarding spurious credits.
In this economic model, non-Annex I countries enjoy a slight income gain from exploiting low cost emission reductions.
Local resistance Some civil society groups have argued that most CDM projects benefit big industries, while doing harm to excluded people.
[9] The Guardian reported that the CDM has "essentially collapsed", due to the prolonged downward trend in the price of CERs, which had been traded for as much as $20 (£12.50) a tonne before the global financial crisis to less than $3.
The EU ETS allowed firms to comply with their commitments by buying offset credits, and thus created a perceived value to projects.
[3] Fluoroform is estimated to have a global warming potential 11,000 times greater than carbon dioxide, so destroying a tonne of HFC-23 earns the refrigerant manufacturer 11,000 certified emissions reduction units.
[55] The findings of the report were based on a systematic evaluation of 93 randomly chosen registered CDM projects, as well as interviews and a literature survey (p. 5).
An argument against additionality is based on the fact that developing countries are not subject to emission caps in the Kyoto Protocol (Müller, 2009, pp. iv, 9-10).
[49] To maintain this integrity, it was suggested that projects meeting or exceeding ambitious policy objectives or technical standards could be deemed additional.
Pioneering research has suggested that an average of approximately 30% of the money spent on the open market buying CDM credits goes directly to project operating and capital expenditure costs.
The researchers noted that the sample of projects studied was small, the range of figures was wide and that their methodology of estimating values slightly overstated the average broker's premium.
[63] Since the cost of dismantling these gases is very low compared to the market price of the CERs, very large profits can be made by companies setting up these projects.
Barbara Haye calculated that more than a third of all hydro-projects recognized as a CDM-project "were already completed at the time of registration and almost all were already under construction",[67] which means that CERs are issued for projects that are not additional, which again indirectly leads to higher emissions.
Another important factor in the dysfunctionality of the EB is the lack of time, staff and financial resources it has to fully evaluate a project proposal.
[69] The first commitment period of the Kyoto Protocol excluded forest conservation as well as avoided deforestation from the CDM for a variety of political, practical and ethical reasons.
There is so far no international agreement about whether projects avoiding deforestation or conserving forests should be initiated through separate policies and measures or stimulated through the carbon market.
An emerging proposal, Reduced Emissions from Avoided Deforestation and Degradation (REDD), would allow rain forest preservation to qualify for CDM project status.
In July 2011, Reuters reported that a 4,000 MW coal thermal electricity generation plant in Krishnapatnam in Andhra Pradesh had been registered with the CDM.
CDM Watch and the Sierra Club criticised the plant's registration and its eligibility for certified emission reduction units as clearly not additional.
[76] Some CERs are produced from CDM projects at refrigerant-producing factories in non-Annex I countries that generate the powerful greenhouse gas HFC 23 as a by-product.
Organisation seeking to measure the degree of compliance of individual projects with WCD principles can use the Hydropower Sustainability Assessment Protocol, recommended as the most practical currently available evaluation tool.
[84] For example, a South African brick kiln was faced with a business decision; replace its depleted energy supply with coal from a new mine, or build a difficult but cleaner natural gas pipeline to another country.
During its approval process, the validators noted that changing the supply from coal to gas met the CDM's 'additionality' criteria and was the least cost-effective option.
[55] Schneider (2007) concluded by stating that if concerns over the CDM are properly addressed, it would continue to be an "important instrument in the fight against climate change."
