The Clean Development Mechanism, CDM was one of the flexible mechanisms defined in the Kyoto Protocol that provides for emission reduction projects which generate Certified Emission Reduction (CER) units that may be traded in emission trading schemes.
The CDM was criticised by NGOs as soon as it was introduced, mainly by the US, which by the time of Kyoto Protocol (1997) had no intention to cut its coal, gas and oil, under president Bill Clinton.
The Americans got all the flexibility they wanted. Then they defected from the Protocol anyway.
When the Obama administration re-entered the Kyoto Protocol and promised to cut emissions, at least in the long term, the flexible mechanisms were well established, with entrenched interests in defending them, both among sellers in the third world and among buyers and middlemen in rich countries.
By 2018 they had generated projects worth more than $300 billion.
This continued even as the price crashed to zero in 2012. The price remains low at about €0.3/ton, compared with about €25/ton for EU trade.
To judge from a series of articles1 in the most influential Swedish daily newspaper, Dagens Nyheter (DN), in late 2019, the early criticism of the CDM was well-founded.
Afforestation is one of the most commonly used ways to generate carbon reduction units (CERs). Credits to save rainforests that keep sucking up CO₂ were to be sold to companies as offsets against emissions of greenhouse gases.
“Carbon offsets are not our get-out-of-jail free card,” the UN body wrote2.
“45 per cent of forest restoration projects have instead become plantations for fast-growing monocultures that decreases diversity and store less carbon,” commented Dagens Nyheter with reference to a Nature article3.
Rainforests that are supposedly being saved by such projects keep getting destroyed in Brazil, the country with most such projects. This was reported by Propublica4, and led, according to Dagens Nyheter to the UN distancing itself from its own system:
The Swedish hamburger chain Max Burger claims to be climate positive, “every chew contributes to a better climate,” they say. This is because they have offset 110 per cent of their emissions, and they plant domestic trees in Uganda. They won a UN prize in September 2019.
But as Dagens Nyheter writes, even “this prestige project is scattered with question marks”, referring to researchers who have interviewed villagers:
- Some have logged before due time.
- The contracts are in English, which few villagers speak.
- Project developer Ecotrust is described as inaccessible.
The long-term climate benefit is uncertain. Farmers undertake to leave the trees for 25 years, but are only paid for 10 years. There is no plan for replanting after logging. At present, growing coffee or sugarcane is more profitable.
Afforestation is not always beneficial for the climate, according to scientist Mariska te Beest. Savannas that are kept open by grazing animals already store large amounts of carbon in the soil, and if you plant forest on such ground, the soil will probably store less carbon, although more research is needed. And if the forest is darker than the land before afforestation, this will have a heating effect outside the carbon balance.
Max Burger are well aware that offsets must be combined with emission reductions. And their accounting is transparent, according to DN.
This is unusual. Sweden’s biggest travel company, Tui, claimed that it compensates for all its emissions, and in advertisement videos that it “contributes to a better world”. It gave no details about its offsets to DN, but it considered CDM as a certificate of quality from the UN. The CDM credits are registered by the EU transaction log, but are not public until three years later.
“None of the companies Tui, Ving (the second biggest travel company in Sweden), SAS (airline), or Bra (airline) will say how much money they invest in climate compensation. While the companies include offsets in the ticket price, they claim that it does not result in any price increase for the customer.”
Buyers of offsets, for example airlines and travel agencies, depend on companies that specialise in offsets, as they usually do not have the know-how inhouse. That does not contribute to transparency.
“Of those [companies] that have been contracted by or referred to by airlines and travel companies, four are based outside Sweden, and others have foreign owners, holding companies in Switzerland, Singapore or Cyprus. They all say they are prohibited from disclosing information about their clients,” writes DN.
Dagens Nyheter concludes that it is not possible to verify the claims of Tui or the airline SAS that they offset all their emissions. They will not show any receipts or certificates. Ving and Bra make claims that are partly verifiable.
Even if a company is open about how many offsets it has purchased, where they take place, gives access to its contracts, and can prove that these offsets cover direct and indirect emissions, that is still only half the story.
Whereas there is no double-counting in emission trading within the EU, for example, this is not certain for the CDM. A wind energy project that offsets an investment in a coal power plant will reduce emissions by so many tonnes per year over say 25 years. Under that condition it is easy to agree on how much. But how do you know that a) the coal power plant would have been built without the CDM project and b) that the wind farm would not have been built without the CDM project?
If the answer is no to either question, the project does not deliver any emission reduction. The purchaser has paid for a reduction, but there is no “additionality”.
The Öko Institute in Freiburg, Germany, and Stockholm Environment Institute have tried to answer the question of whether a project is likely to be additional or not, and have screened 76 per cent of all CDM projects between 2013 and 2020, in a study: “How additional is the clean development mechanism?” The scientists conclusion is that 85 per cent of the projects in the study have low probability of yielding additional emission reductions without over-estimates.
Only 2 per cent have a high probability of giving the emissions reductions at face value, and 13 per cent somewhere in between.
Martin Cames, one of the seven researchers behind the study said to DN:
“Renewable energy projects, and especially wind parks, have two great challenges. They are very expensive investments and the income from CDM are tiny, compared to factors such as interest rates, electricity prices and other things that decide the financial viability. You also have to assess how much renewable energy is already part of the national policy.
There are a good many wind power plants in India that have been built without CDM money, writes DN, referring to a study from 2014 from LSE and Paris Tech.
It is not just CDM projects that produce dubious and overestimated emissions reductions.
“According to the SEI and ÖI researchers, writes DN, the conclusions are also valid for certifications on the voluntary market. The Gold Standard and Verified Carbon Standard are often described as stricter than the CDM, but according to the report they share the same problems of additionality and over-rating of carbon credits. The same applies to the air industry’s international programme CORSIA, which comes into force in 2021, and is expected to dominate the demand for offsets in the future.
Another problem, pointed out by DN with reference to another SEI study, is that old projects, where emission reductions took place many years ago, are now being used to meet climate targets under the Paris agreement5, CORSIA and travel company Ving among them.
Sweden is a key player in offsets, as the fourth biggest purchaser of CDM.
DN confronted the climate minister Isabella Lövin (Green Party) after the series of articles. She has previously compared offsets to indulgence and now said that “we have to get away from the thought that you can offset anything”.
She has nevertheless defended the Swedish Energy Authority and its vast, long-term purchase of CDM projects, but also points out that the credits so far have been annulled and not used to fulfill climate targets.
On the other hand, Ulf Kristersson, leader of the biggest opposition party to the right of the centre-left government, said to DN that Lövin’s attitude on climate policy is “very provincial, almost nationalistic”, and that “it is not wrong to use Swedish resources to make efforts in other places where it is more efficient than to make them in Sweden”.
Fredrik Lundberg
1. www.dn.se/om/dn-granskar-klimatkompensation/ (in Swedish), by Sverker Lenas and Lisa Röstlund
2. www.unenvironment.org/news-and-stories/story/carbon-offsets-are-not-our-...
3. www.nature.com/articles/d41586-019-01026-8
4. https://features.propublica.org/brazil-carbon-offsets/inconvenient-truth...
5. https://www.sei.org/publications/clean-development-mechanism-nationally-...
