Clean Development Mechanism

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Source: https://www.theice.com/marketdata/reports/ReportCenter.shtml

Certified emission reduction units (CERs) monthly spot prices2012

The Clean Development Mechanism (CDM) is oneof the flexibility mechanisms defined in the Kyoto Pro-tocol (IPCC, 2007) that provides for emissions reduc-tion projects which generate Certified Emission Reduc-tion units which may be traded in emissions tradingschemes.[1]

The CDM is defined in Article 12 of the Protocol, andis intended to meet two objectives: (1) to assist partiesnot included in Annex I in achieving sustainable devel-opment and in contributing to the ultimate objective ofthe United Nations Framework Convention on ClimateChange (UNFCCC), which is to prevent dangerous cli-mate change; and (2) to assist parties included in An-nex I in achieving compliance with their quantified emis-sion limitation and reduction commitments (greenhousegas (GHG) emission caps).[2] “Annex I” parties are thosecountries that are listed in Annex I of the treaty, and arethe industrialized countries. Non-Annex I parties are de-veloping countries.The CDM addresses the second objective by allowing theAnnex I countries to meet part of their emission reduc-tion commitments under the Kyoto Protocol by buyingCertified Emission Reduction units from CDM emissionreduction projects in developing countries (Carbon Trust,2009, p. 14).[3] The projects and the issue of CERs issubject to approval to ensure that these emission reduc-tions are real and “additional.” The CDM is supervised bythe CDM Executive Board (CDM EB) and is under theguidance of the Conference of the Parties (COP/MOP)of the United Nations Framework Convention on ClimateChange (UNFCCC).The CDM allows industrialized countries to buy CERS

and to invest in emission reductions where it is cheapestglobally (Grubb, 2003, p. 159).[4] Between 2001, whichwas the first year CDM projects could be registered and7 September 2012, the CDM issued 1 billion CertifiedEmission Reduction units.[5] As of 1 June 2013, 57% ofall CERS had been issued for projects based on destroy-ing either HFC-23 (38%) or N2O (19%).[6] Carbon cap-ture and storage (CCS) was included in the CDM carbonoffsetting scheme in December 2011.[7]

However, a number of weaknesses of the CDMhave beenidentified (World Bank, 2010, p. 265-267). Several ofthese issues were addressed by the new Program of Activ-ities (PoA) that moves to approving 'bundles’ of projectsinstead of accrediting each project individually. In 2012,the report Climate change, carbon markets and the CDM:A call to action said governments urgently needed to ad-dress the future of the CDM. It suggested the CDM wasin danger of collapse because of the low price of car-bon and the failure of governments to guarantee its ex-istence into the future. Writing on the website of theClimate & Development Knowledge Network, YolandaKakabadse, a member of the investigating panel for thereport and founder of Fundacion Futuro Latinamericano,said a strong CDM is needed to support the political con-sensus essential for future climate progress. “Thereforewe must do everything in our hands to keep it working,”she said.[8]

1 History

The CDM is one of the “flexibility mechanisms” that isdefined in the Kyoto Protocol. The flexibility mecha-nisms are designed to allow Annex B countries to meettheir emission reduction commitments with reduced im-pact on their economies (IPCC, 2007).[1] The flexibilitymechanismswere introduced to theKyoto Protocol by theUS government. Developing countries were highly skep-tical and fiercely opposed to the flexibility mechanisms(Carbon Trust, 2009, p. 6).[3] However, in the interna-tional negotiations over the follow-up to the Kyoto Proto-col, it has been agreed that the mechanisms will continue.

2 Purpose

The purpose of the CDM is to promote clean develop-ment in developing countries, i.e., the “non-Annex I”countries (countries that aren't listed in Annex I of the

1

2 3 CDM PROJECT PROCESS

Framework Convention). The CDM is one of the Pro-tocol’s “project-based” mechanisms, in that the CDM isdesigned to promote projects that reduce emissions. TheCDM is based on the idea of emission reduction “pro-duction” (Toth et al., 2001, p. 660).[9] These reductionsare “produced” and then subtracted against a hypotheti-cal “baseline” of emissions. The emissions baseline arethe emissions that are predicted to occur in the absenceof a particular CDM project. CDM projects are “cred-ited” against this baseline, in the sense that developingcountries gain credit for producing these emission cuts.The economic basis for including developing countriesin efforts to reduce emissions is that emission cuts arethought to be less expensive in developing countries thandeveloped countries (Goldemberg et al., 1996, p. 30;[10]Grubb, 2003, p. 159).[4] For example, in developingcountries, environmental regulation is generally weakerthan it is in developed countries (Sathaye et al., 2001,p. 387-389).[11] Thus, it is widely thought that there isgreater potential for developing countries to reduce theiremissions than developed countries.From the viewpoint of bringing about a global reduc-tion in emissions, emissions from developing countriesare projected to increase substantially over this century(Goldemberg et al., 1996, p. 29).[10] Infrastructure deci-sions made in developing countries could therefore have avery large influence on future efforts to limit total globalemissions (Fisher et al., 2007).[12] The CDM is designedto start off developing countries on a path towards lesspollution, with industrialised (Annex B) countries payingfor these reductions.There were two main concerns about the CDM (CarbonTrust, 2009, pp. 14–15). One was over the additionalityof emission reductions produced by the CDM (see thesection on additionality). The other was whether it wouldallow rich, northern countries, and in particular, compa-nies, to impose projects that were contrary to the devel-opment interests of host countries. To alleviate this con-cern, the CDM requires host countries to confirm thatCDM projects contribute to their own sustainable de-velopment. International rules also prohibit credits forsome kind of activities, notably from nuclear power andavoided deforestation.To prevent industrialised countries from making unlim-ited use of CDM, the framework has a provision that useof CDM be ‘supplemental’ to domestic actions to reduceemissions. This wording has led to a wide range of inter-pretations - the Netherlands for example aims to achievehalf of its required emission reductions (from a BAUbaseline) by CDM. It treats Dutch companies’ purchasesof European Emissions Trading Scheme allowances fromcompanies in other countries as part of its domestic ac-tions.The CDM gained momentum in 2005 after the entry intoforce of the Kyoto Protocol. Before the Protocol enteredinto force, investors considered this a key risk factor. The

initial years of operation yielded fewer CDM credits thansupporters had hoped for, as Parties did not provide suf-ficient funding to the EB. This left it understaffed.The Adaptation Fund was established to finance concreteadaptation projects and programmes in developing coun-tries that are Parties to the Kyoto Protocol. The Fund isto be financed with a share of proceeds from clean devel-opment mechanism (CDM) project activities and receivefunds from other sources.

3 CDM project process

3.1 Outline

An industrialised country that wishes to get credits froma CDM project must obtain the consent of the develop-ing country hosting the project that the project will con-tribute to sustainable development. Then, using method-ologies approved by the CDM Executive Board (EB),the applicant (the industrialised country) must make thecase that the carbon project would not have happenedanyway (establishing additionality), and must establish abaseline estimating the future emissions in absence ofthe registered project. The case is then validated by athird party agency, called a Designated Operational En-tity (DOE), to ensure the project results in real, measur-able, and long-term emission reductions. The EB then de-cides whether or not to register (approve) the project. If aproject is registered and implemented, the EB issues cred-its, called Certified Emission Reductions (CERs, com-monly known as carbon credits, where each unit is equiv-alent to the reduction of one metric tonne of CO2e, e.g.CO2 or its equivalent), to project participants based onthe monitored difference between the baseline and theactual emissions, verified by the DOE.

3.2 Additionality

To avoid giving credits to projects that would have hap-pened anyway (“freeriders”), rules have been specified toensure additionality of the proposed project, that is, to en-sure the project reduces emissions more than would haveoccurred in the absence of the intervention created by theCDM.[13] At present, the CDM Executive Board deems aproject additional if its proponents can document that re-alistic alternative scenarios to the proposed project wouldbe more economically attractive or that the project facesbarriers that CDM helps it overcome. Current Guidancefrom the EB is available at the UNFCCC website.[14]

3.3 Baseline

The determination of additionality and the calculation ofemission reductions depends on the emissions that wouldhave occurred without the project minus the emissions

4.1 Difficulties with the CDM 3

of the project. Accordingly, the CDM process requiresan established baseline or comparative emission estimate.The construction of a project baseline often depends onhypothetical scenario modeling, and may be estimatedthrough reference to emissions from similar activities andtechnologies in the same country or other countries, orto actual emissions prior to project implementation. Thepartners involved in the project could have an interest inestablishing a baseline with high emissions, which wouldyield a risk of awarding spurious credits. Independentthird party verification is meant to avoid this potentialproblem.

3.4 Methodologies

Any proposed CDM project has to use an approved base-line and monitoring methodology to be validated, ap-proved and registered. Baseline Methodology will setsteps to determine the baseline within certain applica-bility conditions whilst monitoring methodology will setspecific steps to determine monitoring parameters, qual-ity assurance, equipment to be used, in order to obtaindata to calculate the emission reductions. Those approvedmethodologies are all coded:[15]

AM - Approved MethodologyACM - Approved Consolidated MethodologyAMS - Approved Methodology for Small Scale ProjectsARAM - Aforestation and Reforestation ApprovedMethodologiesAll baseline methodologies approved by Executive Boardare publicly available along with relevant guidance on theUNFCCC CDM website.[16] If a DOE determines thata proposed project activity intends to use a new base-line methodology, it shall, prior to the submission forregistration of this project activity, forward the proposedmethodology to the EB for review, i.e. consideration andapproval, if appropriate.[17]

4 Economics

According to Burniaux et al., 2009, p. 37, creditingmechanisms like the CDM could play three importantroles in climate change mitigation :[18]

• Improve the cost-effectiveness of GHG mitigationpolicies in developed countries

• Help to reduce “leakage” (carbon leakage) ofemissions from developed to developing countries.Leakage is where mitigation actions in one coun-try or economic sector result in another country’sor sector’s emissions increasing, e.g., through relo-cation of polluting industries from Annex I to non-Annex I countries (Barker et al., 2007).[19]

• Boost transfers of clean, less polluting technologiesto developing countries.

According to Burniaux et al. (2009, p. 37), the cost-saving potential of a well-functioning crediting mecha-nism appears to be very large. Compared to baselinecosts (i.e., costs where emission reductions only takeplace in Annex I countries), if the cap on offset use wasset at 20%, one estimate suggests mitigation costs couldbe halved. This cost saving, however, should be viewedas an upper bound: it assumes no transaction costs andno uncertainty on the delivery of emission savings. An-nex I countries who stand to gain most from crediting in-clude Australia, New Zealand, and Canada. In this eco-nomic model, non-Annex I countries enjoy a slight in-come gain from exploiting low cost emission reductions.Actual transaction cost in the CDM are rather high, whichis problematic for smaller projects.[20] This issue is ad-dressed by the Program of Activities (PoA) modality.

4.1 Difficulties with the CDM

Carbon leakageIn theory, leakage may be reduced by crediting mecha-nisms (Burniaux et al., 2009, p. 38). In practice, theamount of leakage partly depends on the definition ofthe baseline against which credits are granted. The cur-rent CDM approach already incorporates some leakage.Thus, reductions in leakage due to the CDMmay, in fact,be small or even non-existent.Additionality, transaction costs and bottlenecksIn order to maintain the environmental effectiveness ofthe Kyoto Protocol, emission savings from the CDMmustbe additional (World Bank, 2010, p. 265).[21] Withoutadditionality, the CDM amounts to an income transferto non-Annex I countries (Burniaux et al., 2009, p. 40).Additionality is, however, difficult to prove, and is thesubject of vigorous debate.[13]

Burniaux et al. (2009) commented on the large trans-action costs of establishing additionality. Assessing ad-ditionality has created delays (bottlenecks) in approvingCDM projects. According to World Bank (2010), thereare significant constraints to the continued growth of theCDM to support mitigation in developing countries.IncentivesThe CDM rewards emissions reductions, but does not pe-nalize emission increases (Burniaux et al., 2009, p. 41).It therefore comes close to being an emissions reductionsubsidy. This can create a perverse incentive for firms toraise their emissions in the short-term, with the aim ofgetting credits for reducing emissions in the long-term.Another difficulty is that the CDM might reduce the in-centive for non-Annex I countries to cap their emissions.This is because most developing countries benefit morefrom a well-functioning crediting mechanism than from a

4 5 FINANCIAL ISSUES

world emissions trading scheme (ETS), where their emis-sions are capped. This is true except in cases where theallocation of emissions rights (i.e., the amount of emis-sions that each country is allowed to emit) in the ETS isparticularly favourable to developing countries.Local resistanceWhile the C in CDM stands for Clean, most projectsmight be better defined with the B from Big, from largehydropower to HFC or waste to energy and clean coalprojects (which all together make the majority of creditsgenerated through CDM). The argument in favor of theCDM is that it brings development to the South. How-ever, in all continents the mainly Big Development itstands for is resisted by local people in those countries. Aglobal coalition of researchers published a large report onAfrican civil society resistance to CDM projects all overthe continent.[22] In New Delhi, India, a grassroots move-ment of wastepickers is resisting another CDM project[23]on what the makers call 'the waste war' in Delhi. InPanama, a CDM project is blocking peace talks betweenthe Panamanian government and the indigenous Ngöbe-Buglé people.[24] Civil society groups and researchers inboth North and South have complained for years thatmost CDM projects benefit big industries, while doingharm to excluded people. As local protests against CDMprojects are arising on every continent, the notion thatCDM 'brings development to the South' is contested.Market deflationMost of the demand for CERs from the CDMcomes fromthe European Union Emissions Trading Scheme which isthe largest carbon market. In July 2012, the market pricefor CERs fell to new record low of 2.67 euros a tonne.This represented a change in price of about 70 percentin a year. Analysts attributed the low CER price to lowerprices paid for European Union emissions allowances, theover supply of EU emissions allowances and the slowingEuropean economy.[25]

In September 2012, The Economist described the CDMas a “complete disaster in the making” and “in need ofa radical overhaul”. This was because carbon prices, in-cluding prices for CERS, had collapsed, from $20 a tonnein August 2008 to below $5 in response to the Euro-zone debt crisis reducing industrial activity and the over-allocation of emission allowances under the EuropeanUnion Emissions Trading Scheme.[26] The Guardian re-ported that the CDM has “essentially collapsed”, due tothe prolonged downward trend in the price of CERs,which had been traded for as much as $20 (£12.50) atonne before the global financial crisis to less than $3.With such low CER prices, potential projects were notcommercially viable.[27] In October 2012, CER prices fellto a new low of 1.36 euros a metric tonne on the Lon-don ICE Futures Europe exchange.[28] In October 2012Thomson Reuters Point Carbon calculated that the over-supply of units from the Clean Development Mechanismand Joint Implementation would be 1,400 million units

for the period up to 2020 and Point Carbon predictedthat Certified Emission Reduction (CER) prices wouldto drop from €2 to 50 cents.[29] On 12 December 2012CER prices reached another record low of 31 cents.[30]Bloomberg reported that Certified Emission Reductionprices had declined by 92 percent to 39 each cents in the2012 year.[31]

5 Financial issues

With costs of emission reduction typically much lowerin developing countries than in industrialised countries,industrialised countries can comply with their emissionreduction targets at much lower cost by receiving creditsfor emissions reduced in developing countries as long asadministration costs are low.The IPCC has projected GDP losses for OECD Eu-rope with full use of CDM and Joint Implementationto between 0.13% and 0.81% of GDP versus 0.31% to1.50%[32] with only domestic action.While there would always be some cheap domestic emis-sion reductions available in Europe, the cost of switch-ing from coal to gas could be in the order of €40-50 pertonne CO2 equivalent. Certified Emission Reductionsfrom CDM projects were in 2006 traded on a forwardbasis for between €5 and €20 per tonne CO2 equiva-lent. The price depends on the distribution of risk be-tween seller and buyer. The seller could get a very goodprice if it agrees to bear the risk that the project’s base-line and monitoring methodology is rejected; that thehost country rejects the project; that the CDM Execu-tive Board rejects the project; that the project for somereason produces fewer credits than planned; or that thebuyer doesn't get CERs at the agreed time if the inter-national transaction log (the technical infrastructure en-suring international transfer of carbon credits) is not inplace by then. The seller can usually only take these risksif the counterparty is deemed very reliable, as rated byinternational rating agencies.

5.1 Mitigation finance

The revenues of the CDMconstitutes the largest source ofmitigation finance to developing countries to date (WorldBank, 2010, p. 261-262).[21] Over the 2001 to 2012 pe-riod, CDM projects could raise $18 billion ($15 billionto $24 billion) in direct carbon revenues for developingcountries. Actual revenues will depend on the price ofcarbon. It is estimated that some $95 billion in clean en-ergy investment benefitted from the CDM over the 2002-08 period.

6.1 Transportation 5

5.2 Adaptation finance

The CDM is the main source of income for the UNFCCCAdaptation Fund, which was established in 2007 to fi-nance concrete adaptation projects and programmes indeveloping countries that are parties to the Kyoto Pro-tocol (World Bank, 2010, p. 262-263).[21] The CDM issubject to a 2% levy, which could raise between $300million and $600 million over the 2008-12 period. Theactual amount raised will depend on the carbon price.

6 CDM projects

Others 5.4%

Argentina 0.9%Chile 1.0%

Mexico 1.6%

Brazil 7.2%

R. of Korea 9.1%

India 14.7%

China 59.9%

Certified emission reduction units by country

Data: http://cdm.unfccc.int/Statistics/Issuance/CERsIssuedByHostPartyPieChart.html

Certified emission reduction units (CERs) by country October2012

Since 2000, the CDM has allowed crediting of project-based emission reductions in developing countries (Guptaet al., 2007).[33] By 1 January 2005, projects submittedto the CDM amounted to less than 100 MtCO2e of pro-jected savings by 2012 (Carbon Trust, 2009, p. 18-19).[3]The EU ETS started in January 2005, and the followingmonth saw the Kyoto Protocol enter into force. The EUETS allowed firms to comply with their commitments bybuying offset credits, and thus created a perceived valueto projects. The Kyoto Protocol set the CDM on a firmlegal footing.By the end of 2008, over 4,000 CDM projects had beensubmitted for validation, and of those, over 1,000 wereregistered by the CDM Executive Board, and were there-fore entitled to be issued CERs (Carbon Trust, 2009, p.19). In 2010, the World Bank estimated that in 2012,the largest potential for production of CERs would befrom China (52% of total CERs) and India (16%) (WorldBank, 2010, p. 262).[21] CERs produced in Latin Amer-ica and the Caribbean would make up 15% of the poten-tial total, with Brazil as the largest producer in the region(7%).

By 14 September 2012, 4626 projects had been registeredby the CDMExecutive Board as CDM projects.[34] Theseprojects are expected to result in the issue of 648,232,798certified emissions reductions.[35] By 14 September 2012,the CDMBoard had issued 1 billionCERS, 60%ofwhichoriginated from projects in China. India, the Republic ofKorea, and Brazil were issued with 15%, 9% and 7% ofthe total CERS.[36]

The Himachal Pradesh Reforestation Project is claimedto be the world’s largest CDM.[37]

6.1 Transportation

There are currently 29 transportation projects registered,the last was registered on February 25, 2013 and is hostedin China. [38]

6.2 Destruction of HFC-23

Some CDM projects remove or destroy industrial gases,such as hydrofluorocarbon-23 (HFC-23) and nitrous ox-ide (N2O). HFC-23 is a potent greenhouse gas (GHG)and is a byproduct from the production of the refrigerantgas chlorodifluoromethane (HCFC-22).[3] The gas HFC-23 is estimated to have a global warming effect 11,000times greater than carbon dioxide, so destroying a tonneof HFC-23 earns the refrigerant manufacturer 11,000certified emissions reduction units.[39]

In 2009, the Carbon Trust estimated that industrial gasprojects such as those limiting HFC-23 emissions, wouldcontribute about 20% of the CERS issued by the CDMin 2012. The Carbon Trust expressed the concern thatprojects for destroying HFC-23 were so profitable thatcoolant manufacturers could be building new factoriesto produce the coolant gas. (Carbon Trust, 2009, p.60).[3] In September 2010, Sandbag estimated that in2009 59% of the CERs used as offsets in the EuropeanUnion Emissions Trading Scheme originated from HFC-23 projects.[40]

An example is the Plascon, Plasma arc plant that was in-stalled by Quimobásicos S.A. de C.V inMonterrey, Mex-ico to eliminate of HCFC-23, a byproduct of the produc-tion of R-22 refrigerant gas.From 2005 to June 2012, 19 manufacturers of refriger-ants (11 in China, 5 in India, and one each in Argentina,Mexico and South Korea),[41] were issued with 46% ofall the certified emissions reduction units from the CDM.David Hanrahan, the technical director of IDEAcarbonbelieves each plant would probably have earned an av-erage of $20 million to $40 million a year from theCDM. The payments also incentivise the increased pro-duction of the ozone-depleting refrigerant HCFC-22, anddiscourage substitution of HCFC-22 with less harmfulrefrigerants.[39]

In 2007 the CDM stopped accepting new refrigerant

6 8 VIEWS ON THE CDM

manufacturers into the CDM. In 2011, the CDM renewedcontracts with the nineteen manufacturers on the condi-tion that claims for HFC-23 destruction would be lim-ited to 1 percent of their coolant production. However,in 2012, 18 percent of all CERS issued are expected togo to the 19 coolant plants, compared with 12 percentto 2,372 wind power plants and 0.2 percent to 312 solarprojects.[39]

In January 2011, the European Union Climate ChangeCommittee banned the use of HFC-23 CERs in theEuropean Union Emissions Trading Scheme from 1 May2013. The ban includes nitrous oxide (N2O) from adipicacid production. The reasons given were the perverse in-centives, the lack of additionality, the lack of environ-mental integrity,the under-mining of the Montreal Proto-col, costs and ineffectiveness and the distorting effect of afew projects in advanced developing countries getting toomany CERs.[42] From 23 December 2011, CERs fromHFC-23 and N2O destruction projects were banned fromuse in the New Zealand Emissions Trading Scheme, un-less they had been purchased under future delivery con-tracts entered into prior to 23 December 2011. The useof the future delivery contracts ends in June 2013.[43]

As of 1 June 2013, the CDM had issued 505,125 CERs,or 38% of all CERs issued, to 23 HFC-23 destructionprojects. A further 19% (or 255,666 CERs) had beenissued to 108 N2O destruction projects.[6]

7 Barriers

World Bank (n.d., p. 12) described a number of barri-ers to the use of the CDM in least developed countries(LDCs).[44] LDCs have experienced lower participationin the CDM to date. Four CDM decisions were high-lighted as having a disproportionate negative impact onLDCs:

• Suppressed demand: Baseline calculations forLDCs are low, meaning that projects cannot gener-ate sufficient carbon finance to have an impact.

• Treatment of projects that replace non-renewable biomass: A decision taken led toessentially a halving in the emission reductionpotential of these projects. This has particularlyaffected Sub-Saharan Africa and projects in poorcommunities, where firewood, often from non-renewable sources, is frequently used as a fuel forcooking and heating.

• Treatment of forestry projects and exclusion ofagriculture under the CDM: These sectors aremore important for LDCs than for middle-incomecountries. Credits from forestry projects are penal-ized under the CDM, leading to depressed demandand price.

• Transaction costs and CDM process require-ments: These are geared more towards the most ad-vanced developing countries, and do not work wellfor the projects most often found in LDCs.

8 Views on the CDM

8.1 Additionality

8.1.1 Emissions

One of the difficulties of the CDM is in judging whetheror not projects truly make additional savings in GHGemissions (Carbon Trust, 2009, p. 54-56).[3] The base-line which is used in making this comparison is not ob-servable. According to the Carbon Trust (2009), someprojects have been clearly additional: the fitting of equip-ment to remove HFCs and N2O. Some low-carbon elec-tricity supply projects were also thought to have displacedcoal-powered generation. Carbon Trust (2009) reviewedsome approved projects. In their view, some of theseprojects had debatable points in their additionality assess-ments. They compared establishing additionality to thebalance of evidence in a legal system. Certainty in addi-tionality is rare, and the higher the proof of additionality,the greater the risk of rejecting good projects to reduceemissions.

8.1.2 Types

Additionality is a much contested. There are many rivalinterpretations of additionality:

1. What is often labelled ‘environmental additionality’has that a project is additional if the emissions fromthe project are lower than the baseline. It gener-ally looks at what would have happened without theproject.

2. Another interpretation, sometimes termed ‘projectadditionality’, the project must not have happenedwithout the CDM.

A number of terms for different kinds of additionalityhave been discussed, leading to some confusion, particu-larly over the terms 'financial additionality' and 'invest-ment additionality' which are sometimes used as syn-onyms. 'Investment additionality', however, was a con-cept discussed and ultimately rejected during negotia-tion of the Marrakech Accords. Investment additionalitycarried the idea that any project that surpasses a certainrisk-adjusted profitability threshold would automaticallybe deemed non-additional.[45] 'Financial additionality' isoften defined as an economically non-viable project be-coming viable as a direct result of CDM revenues.

8.2 Concerns 7

Many investors argue that the environmental addition-ality interpretation would make the CDM simpler. En-vironmental NGOs have argued that this interpretationwould open the CDM to free-riders, permitting devel-oped countries to emit more CO₂ₑ, while failing to pro-duce emission reductions in the CDM host countries.[46]

Gillenwater (2011) evaluated the various definitions ofadditionality used within the CDM community and pro-vided a synthesis definition that rejects the notion of therebeing different types of additionality.[13][47][48]

Schneider (2007) produced a report on the CDM for theWWF.[49] The findings of the report were based on asystematic evaluation of 93 randomly chosen registeredCDM projects, as well as interviews and a literature sur-vey (p. 5). According to Schneider (2007, p. 72), theadditionality of a significant number of projects over the2004-2007 period seemed to be either unlikely or ques-tionable.It is never possible to establish with certainty what wouldhave happened without the CDM or in absence of a par-ticular project, which is one common objection to theCDM. Nevertheless, official guidelines have been de-signed to facilitate uniform assessment,[50] set by theCDM Executive Board for assessing additionality.

8.1.3 Views on additionality

An argument against additionality is based on the fact thatdeveloping countries are not subject to emission caps inthe Kyoto Protocol (Müller, 2009, pp. iv, 9-10).[51] Onthese basis, “business-as-usual” (BAU) emissions (i.e.,emissions that would occur without any efforts to reducethem) in developing countries should be allowed. By set-ting a BAU baseline, this can be interpreted as being atarget for developing countries. Thus, it is, in effect, a re-striction on their right to emit without a cap. This can beused as an argument against having additionality, in thesense that non-additional (i.e., emission reductions thatwould have taken place under BAU) emission reductionsshould be credited.Müller (2009) argued that compromise was necessary be-tween having additionality and not having it. In his view,additionality should sometimes be used, but other times,it shouldn't.According toWorld Bank (n.d., pp. 16–17), additionalityis crucial in maintaining the environmental integrity ofthe carbon market.[44] To maintain this integrity, it wassuggested that projects meeting or exceeding ambitiouspolicy objectives or technical standards could be deemedadditional.

8.2 Concerns

8.2.1 Overall efficiency

Pioneering research has suggested that an average of ap-proximately 30% of the money spent on the open mar-ket buying CDM credits goes directly to project operat-ing and capital expenditure costs.[52][53] Other significantcosts include the broker’s premium (about 30%, under-stood to represent the risk of a project not delivering)and the project shareholders’ dividend (another 30%).The researchers noted that the sample of projects studiedwas small, the range of figures was wide and that theirmethodology of estimating values slightly overstated theaverage broker’s premium.

8.2.2 The risk of fraud

One of the main problems concerning CDM-projects isthe risk of fraud.[54][55][56] The most common practicesare covering up the fact that the projects are financiallyviable by themselves and that the emission reductions ac-quired through the CDM-project aren’t additional. Exag-gerating the carbon benefits is also a common practice,just as carbon leakage. Sometimes a company even pro-duces more to receive more CERs.Most of the doubtful projects are Industrial gas projects.Even though only 1.7% of all CDM-projects can be qual-ified as such, extraordinarily they account for half[57] to69%[58] of all CERs that have been issued, contributingto a collapse in the global market for all CERs.[57] Sincethe cost of dismantling these gases is very low comparedto the market price of the CERs, very large profits can bemade by companies setting up these projects.[59] In thisway, the CDM has become a stimulus for carbon leak-age, or even to simply produce more.[55][59][60]

Hydro-projects are also quite problematic. Barbara Hayecalculated that more than a third of all hydro-projectsrecognized as a CDM-project ‘were already completedat the time of registration and almost all were alreadyunder construction’,[61] which means that CERs are is-sued for projects that aren’t additional, which again in-directly leads to higher emissions.[62] Moreover, mostof the proposed carbon benefits of these projects areexaggerated.[55]

Why are these projects approved by theClean_Development_Mechanism Executive Board(EB)?’, one might wonder. One of the main problems isthat the EB is a highly politicized body. People takinga place in the board aren’t independent technocrats,but are elected as representatives of their respectivecountries. They face pressure from their own & other(powerful) countries, the World Bank (that subsidizescertain projects), and other lobbying organisations. This,combined with a lack of transparency regarding thedecisions of the board leads to the members favour-ing political-economical over technical or scientificconsiderations.[54][60][63] It seems clear that the CDM

8 8 VIEWS ON THE CDM

isn’t governed according to the rules of ‘good gover-nance’. Solving this problem might require a genuinedemocratization in the election of the EB-members andthus a shift in thinking from government to governance.In practice this would mean that all the stakeholdersshould get a voice in who can have a seat in the EB.Another important factor in the dysfunctionality of theEB is the lack of time, staff and financial resources it hasto fully evaluate a project proposal.[55] Moreover, the ver-ification of a project is often outsourced to companies thatalso deliver services (such as accounting or consultancy)to enterprises setting up these same projects. In this way,the verifiers have serious incentives to deliver a positivereport to the EB.[54][55][60][64] This indicates that imple-mentation is the place where the shoe pinches, as usuallyhappens in environmental issues (mostly due to a lack offunds).[65]

Finally, it should be noted though that there have beenindications in recent years that the EB is becoming morestrict in its decisions, due to the huge criticism and theboard getting more experience.[63]

8.2.3 Exclusion of forest conservation/avoided de-forestation from the CDM

The first commitment period of the Kyoto Protocol ex-cluded forest conservation as well as avoided deforesta-tion from the CDM for a variety of political, practicaland ethical reasons.[66] However, carbon emissions fromdeforestation represent 18-25% of all emissions,[67] andwill account for more carbon emissions in the next fiveyears than all emissions from all aircraft since the WrightBrothers until at least 2025.[68] Thismeans that there havebeen growing calls for the inclusion of forests in CDMschemes for the second commitment period from a va-riety of sectors, under the leadership of the Coalitionfor Rainforest Nations, and brought together under theForests Now Declaration, which has been signed by over300 NGOs, business leaders, and policy makers. There isso far no international agreement about whether projectsavoiding deforestation or conserving forests should be ini-tiated through separate policies and measures or stimu-lated through the carbon market. One major concernis the enormous monitoring effort needed in order tomake sure projects are indeed leading to increased car-bon storage. There is also local opposition. For exam-ple, May 2, 2008, at the United Nations Permanent Fo-rum on Indigenous Issues (UNPFII), Indigenous leadersfrom around the world protested against the Clean EnergyMechanisms, especially against Reducing emissions fromdeforestation and forest degradation.

8.2.4 Reasons for including avoided deforestationprojects in the CDM

Combating global warming has broadly two components:decreasing the release of greenhouse gases and sequester-ing greenhouse gases from the atmosphere. Greenhousegas emitters, such as coal-fired power plants, are known as“sources”, and places where carbon and other greenhousegases, such as methane, can be sequestered, i.e. kept outof the atmosphere, are known as “sinks”.

The world’s forests, particularly rain forests, are impor-tant carbon sinks, both because of their uptake of CO2

through photosynthesis and because of the amount of car-bon stored in their woody biomass and the soil. Whenrain forests are logged and burned, not only do we losethe forests’ capacity to take up CO2 from the atmosphere,but also the carbon stored in that biomass and soil is re-leased into the atmosphere through release of roots fromthe soil and the burning of the woody plant matter.An emerging proposal, Reduced Emissions fromAvoidedDeforestation and Degradation (REDD), would allowrain forest preservation to qualify for CDM project sta-tus. REDD has gained support through recent meetingsof the COP, and will be examined at Copenhagen.

8.2.5 Coal thermal power generation in India andChina

In July 2011, Reuters reported that a 4,000 MW coalthermal electricity generation plant in Krishnapatnamin Andhra Pradesh had been registered with the CDM.CDM Watch and the Sierra Club criticised the plant’sregistration and its eligibility for certified emission reduc-tion units as clearly not additional. A CDM spokespersondismissed these claims. According to information pro-vided to Reuters, there are total of five coal-fired elec-tricity plants registered with the CDM, four in India witha capacity of 10,640 MW and one 2,000 MW plant inChina. The five plants are eligible to receive 68.2 millionCERs over a 10-year period with an estimated value of661 million euros ($919 million) at a CER price of 9.70euros.[69]

In September 2012, the Executive Board of the CleanDevelopment Mechanism adopted rules confirming thatnew coal thermal power generation plants could be reg-istered as CDM projects and could use the simplifiedrules called 'Programmes of Activities’. The organisationCDM-Watch described the decision as inconsistent withthe objective of the CDM as it subsidised the construc-tion of new coal power plants. CDM-Watch describedthe CERs that would be issued as “non-additional dirtycarbon credits”.[70]

8.2 Concerns 9

8.2.6 Industrial gas projects

Some CERs are produced from CDM projects atrefrigerant-producing factories in non-Annex I countriesthat generate the powerful greenhouse gas HFC 23 as aby-product. These projects dominated the CDM’s earlygrowth, and are expected to generate 20% of all cred-ited emission reductions by 2012 (Carbon Trust, 2009,p. 60).[3] Paying for facilities to destroy HFC-23 can costonly 0.2-0.5 €/tCO2. Industrialized countries were, how-ever, paying around 20 €/tCO2 for reductions that costbelow 1 €/tCO2. This provoked strong criticism.The scale of profits generated by HFC-23 projects threat-ened distortions in competitiveness with plants in in-dustrialized countries that had already cleaned up theiremissions (p. 60). In an attempt to address concernsover HFC-23 projects, the CDM Executive Board madechanges in how these projects are credited. According tothe Carbon Trust (2009, p. 60), these changes effectivelyensure that:

• the potential to capture emissions from these plantsis exploited;

• distortions are reduced;

• and the risk of perverse incentives is capped.

Carbon Trust (2009, p. 60) argued that criticizing theCDM for finding low-cost reductions seemed perverse.They also argued that addressing the problem with tar-geted funding was easy with hindsight, and that beforethe CDM, these emission reduction opportunities werenot taken.

8.2.7 Hydropower

NGOs have criticized the inclusion of large hydropowerprojects, which they consider unsustainable, as CDMprojects. Lately, both the CDMEB and investors have be-come concerned about such projects for potential lack ofadditionality. One reason was that many of these projectshad started well before applying for CDM status. In June2008, third party validator TÜV SÜD Group rejected ahydropower project in China because the project propo-nents could not document that they had seriously consid-ered CDM at the time the project was started. In July2008, third party validators agreed that projects applyingfor CDM status more than one year after having takentheir investment decision should not qualify for CDM sta-tus. Currently, the largest power plant to receive CDMregistration is the Jirau Hydroelectric Plant in Brazil.[71]

Hydropower projects larger than 20 MWmust documentthat they follow World Commission on Dams guidelinesor similar guidelines in order to qualify for the EuropeanUnion’s Emissions Trading Scheme. As of 21 July 2008,

CERs from hydropower projects are not listed on Euro-pean carbon exchanges, because different member statesinterpret these limitations differently.

8.2.8 Other concerns

Renewable energyIn the initial phase of the CDM, policy makers and NGOswere concerned about the lack of renewable energy CDMprojects. As the new CDM projects are now predomi-nantly renewables and energy efficiency projects, this isnow less of an issue.[72]

SinksNGOs, as well as several governments, have consistentlybeen sceptical towards the inclusion of sinks as CDMprojects. The main reasons were fear of oversupply, thatsuch projects cannot guarantee permanent storage of car-bon, and that the methods of accounting for carbon stor-age in biomass are complex and still under development.Consequently, two separate carbon currencies (tempo-rary CERs and long-term CERs) were created for suchprojects. Such credits cannot be imported to the Euro-pean Union’s Emission Trading Scheme. The lack of de-mand for such projects have resulted in very limited sup-ply: Currently (21 July 2008), only one sinks project hasbeen registered under CDM.Windfarms in Western SaharaIn 2012, it was announced, that a windfarm complexis going to be located near Laayoune, the capital cityof the disputed territory of Western Sahara. Since thisproject is to be established under tight collaboration be-tween the UN (which itself recognizes Western Sahara’sstatus of a non-autonomous country) and the Moroc-can government, it has been questioned by many partiessupporting Western Sahara independence, including thePolisario.[73]

8.2.9 Suggestions

In response to concerns of unsustainable projects or spu-rious credits, the World Wide Fund for Nature and otherNGOs devised a ‘Gold Standard’ methodology to cer-tify projects that uses much stricter criteria than required,such as allowing only renewable energy projects.[74]

For example, a South African brick kiln was faced with abusiness decision; replace its depleted energy supply withcoal from a new mine, or build a difficult but cleanernatural gas pipeline to another country. They chose tobuild the pipeline with SASOL. SASOL claimed the dif-ference in GHG emissions as a CDM credit, compar-ing emissions from the pipeline to the contemplated coalmine. During its approval process, the validators notedthat changing the supply from coal to gas met the CDM’s'additionality' criteria and was the least cost-effective

10 10 REFERENCES

option.[75] However, there were unofficial reports that thefuel change was going to take place anyway, although thiswas later denied by the company’s press office.[76]

8.3 Successes

Schneider (2007, p. 73) commented on the success ofthe CDM in reducing emissions from industrial plantsand landfills.[49] Schneider (2007) concluded by statingthat if concerns over the CDM are properly addressed,it would continue to be an “important instrument in thefight against climate change.”

9 See also• Certified Emission Reduction

• Obtaining ownership of land by productive use

• Climate, Community & Biodiversity Alliance

• China Carbon Forum (CCF)

• Verified Carbon Standard

• Additionality

10 References[1] IPCC (2007). “Glossary J-P. In (book section): Annex

I. In: Climate Change 2007: Report of the Intergovern-mental Panel on Climate Change (B. Metz et al. Eds.)".Cambridge University Press, Cambridge, U.K., and NewYork, N.Y., U.S.A. Retrieved 2010-04-23.

[2] Clifford Chance LLP (2013). “Clean Devel-opment Mechanism: CDM and the UNFCC”http://a4id.org/sites/default/files/user/CDM%26UNFCCCcorrected.pdf . Advocates for Interna-tional Development. Retrieved 19 September 2013.

[3] Carbon Trust (March 2009). “Global Carbon Mecha-nisms: Emerging lessons and implications (CTC748)".Carbon Trust website. Retrieved 2010-03-31.

[4] Grubb, M. (July–September 2003). “The Economics ofthe Kyoto Protocol”. World Economics 4 (3): 143–189.Retrieved 2010-03-25.

[5] “Kyoto Protocol’s CDM passes one billionth certifiedemission reduction milestone” (Press release). UNFCCCCDM. 7 September 2012. Retrieved 9 October 2012.

[6] CDM (June 1, 2013). “CDM Projects grouped in types”.UNEP Risoe CDM/JI Pipeline Analysis and Database.Archived from the original on June 18, 2013. RetrievedJune 18, 2013.

[7] “Carbon capture and storage (CCS) accepted as UN-based carbon offsetting scheme, paving way for develop-ing country finance”. Global CCS Institute. Retrieved2011-12-14.

[8] Kakabadse, Yolanda. 20 October 2012. Safeguarding theClean Development Mechanism will benefit Southern andNorthern nations alike

[9] Toth, F.L. et al. (2001). “Decision-making Frameworks.In: Climate Change 2001: Mitigation. Contribution ofWorking Group III to the Third Assessment Report ofthe Intergovernmental Panel on Climate Change (B. Metzet al. Eds.)". Cambridge University Press, Cambridge,U.K., and New York, N.Y., U.S.A. Retrieved 2010-01-10.

[10] Goldemberg, J. et al. (1996). Introduction: scope of theassessment. In: Climate Change 1995: Economic and So-cial Dimensions of Climate Change. Contribution ofWork-ing Group III to the Second Assessment Report of the In-tergovernmental Panel on Climate Change (J.P. Bruce etal. Eds.). Cambridge University Press, Cambridge, U.K.,and New York, N.Y., U.S.A. doi:10.2277/0521568544.ISBN 978-0-521-56854-8.

[11] Sathaye, J., et al. (2001). “Barriers, Opportunities, andMarket Potential of Technologies and Practices. In: Cli-mate Change 2001: Mitigation. Contribution of WorkingGroup III to the Third Assessment Report of the Inter-governmental Panel on Climate Change (B. Metz, et al.,Eds.)". Cambridge University Press, Cambridge, U.K.,and New York, N.Y., U.S.A. Retrieved 2009-05-20.

[12] Fisher, B.S. et al. (2007). “3.1.3 Development trends andthe lock-in effect of infrastructure choices. In (book chap-ter): Issues related to mitigation in the long term context.In: Climate Change 2007: Mitigation. Contribution ofWorking Group III to the Fourth Assessment Report ofthe Intergovernmental Panel on Climate Change (B. Metzet al. Eds.)". Print version: Cambridge University Press,Cambridge, U.K., and NewYork, N.Y., U.S.A.. This ver-sion: IPCC website. Retrieved 2010-03-18.

[13] Gillenwater, M. “What is Additionality? Part 1: A longstanding problem”. Retrieved 10 December 2014.

[14] UNFCCC Tools

[15] http://cdm.unfccc.int/methodologies/documentation/meth_booklet.pdf

[16] http://unfccc.int/cdm

[17] Institute for Global Environmental Strategies (May, 2011)CDM in Charts Version 13.1, p. 23

[18] Burniaux, J-M. et al. (6 June 2009). “The Economicsof Climate Change Mitigation: How to Build the Nec-essary Global Action in a Cost-Effective Manner. Eco-nomics Department Working Papers No. 701” (PDF).OECD website. Retrieved 2010-04-24.

[19] Barker, T. et al. (2007). “11.7.2 Carbon leakage. In(book chapter): Mitigation from a cross-sectoral perspec-tive. In (book): Climate Change 2007: Mitigation. Con-tribution of Working Group III to the Fourth Assess-ment Report of the Intergovernmental Panel on ClimateChange (B. Metz et al. Eds.)". Print version: CambridgeUniversity Press, Cambridge, U.K., and New York, N.Y.,U.S.A.. This version: IPCC website. Retrieved 2010-04-05.

11

[20] World Bank, 2010, States and Trend of the Car-bon Market http://siteresources.worldbank.org/INTCARBONFINANCE/Resources/State_and_Trends_of_the_Carbon_Market_2010_low_res.pdf

[21] World Bank (2010). “World Development Report 2010:Development and Climate Change”. The InternationalBank for Reconstruction and Development / The WorldBank, 1818 H Street NW, Washington DC 20433. Re-trieved 2010-04-06.

[22] 18th of April 2012

[23] video

[24] “UN’s offsetting project Barro Blanco hampers Panamapeace-talks”. Carbon Market Watch. March 15, 2012.Retrieved December 14, 2012.

[25] Chestney, Nina (July 30, 2012). “U.N. carbon credits fallto new record low”. Reuters. Retrieved September 18,2012.

[26] Print Edition (September 15, 2012). “Carbon markets:Complete Disaster in the Making”. The Economist. Re-trieved September 19, 2012.

[27] Harvey, Fiona (September 10, 2012). “Global carbontrading system has 'essentially collapsed'". The Guardian.Retrieved September 20, 2012.

[28] Vitelli, Alessandro (October 20, 2012). “UN CarbonDeclines to Record as EU Moves to Ban ERU Credits”.Bloomberg. Retrieved October 24, 2012.

[29] “Oversupply in Carbon CreditMarket could hit 1,400mil-lion credits by 2020” (Press release). Thomson ReutersPoint Carbon. 10 October 2012. Retrieved 29 November2012.

[30] Allan, Andrew (December 12, 2012). “U.N. offsets crashto 15 cents ahead of EU ban vote”. Point Carbon. Re-trieved December 16, 2012.

[31] Bloomberg (1 January 2013). “European carbon permitprices cap another losing year”. The Age. Retrieved 14January 2013.

[32] Climate Change 2001 - Synthesis report. Figure SPM-8,IPCC, 2001

[33] Gupta, S. et al. (2007). “13.3.3.4.2 Flexibility provisions.In (book chapter): Policies, instruments, and co-operativearrangements. In: Climate Change 2007: Mitigation.Contribution of Working Group III to the Fourth Assess-ment Report of the Intergovernmental Panel on ClimateChange (B. Metz et al. Eds.)". Print version: CambridgeUniversity Press, Cambridge, U.K., and New York, N.Y.,U.S.A.. This version: IPCC website. Retrieved 2010-04-02.

[34] “CDM in numbers”. UNFCCC. 2012-09-16. Archivedfrom the original on 2012-09-16.

[35] “Expected average annual CERS from registered projectsby host party total 648232798”. UNFCCC. 2012-09-14.Archived from the original on 2012-09-16.

[36] “CERs issued by host party total = 1,004,633,719”. UN-FCCC. 2012-09-14. Archived from the original on 2012-09-16.

[37] UN-aided project in Himachal to cut down carbon emis-sions. Times of India (Jun 26 2011)

[38] "CDM:Project Activities”. Retrieved 30 January 2014.

[39] Rosenthal, Elizabeth; Lehren, Andrew W (August 8,2012). “Incentive to Slow Climate Change Drives Out-put of Harmful Gases”. The New York Times. RetrievedSeptember 18, 2012.

[40] “Carbon markets: The smoking greenhouse gun”. TheEconomist. 2 September 2010. Retrieved 24 January2013. According to Sandbag, an outfit that monitors car-bon markets, 59% of the CERs used as offsets in theEU cap-and-trade scheme in 2009 came from HFC-23projects

[41] Rosenthal, Elizabeth; Lehren, Andrew W (August 8,2012). “Subsidies for a Global Warming Gas - Graphic”.The New York Times. Retrieved September 19, 2012.

[42] Hedegaard, Connie (January 21, 2011). “Emissions trad-ing: Commission welcomes vote to ban certain industrialgas credits”. European Commission. Retrieved Septem-ber 18, 2012.

[43] “Regulations restricting the use of HFC-23 and N2OCERs in the NZ ETS”. Ministry for the Environment.22 February 2012. Retrieved 21 September 2012.

[44] World Bank (n.d.). “TheWorld Bank’s 10 years of experi-ence in carbon finance: Insights fromworking with carbonmarkets for development & global greenhouse gas miti-gation (brochure)". Carbon finance on the World Bankwebsite. Retrieved 2010-04-20.

[45] VROM (Netherlands Ministry of Housing, Spacial Plan-ning and the Environment

[46] Failed Mechanism: Hundreds of Hydros Expose Seri-ous Flaws in the CDM; International Rivers; December2, 2007

[47] Gillenwater, M. “What Is Additionality? Part 2: A frame-work for a more precise definitions and standardized ap-proaches”. Retrieved 10 December 2014.

[48] Gillenwater, M. “What Is Additionality? Part 3: Impli-cations for stacking and unbundling,”. Retrieved 10 De-cember 2014.

[49] Schneider, L. (5 November 2007). “Is the CDM fulfillingits environmental and sustainable development objectives?An evaluation of the CDM and options for improvement”.WWF website. Retrieved 2010-04-20.

[50] Tool for the demonstration and assessment of additionality(Version 03), UNFCCC CDM EB, EB 29

[51] Müller, B. (March 2009). “Additionality in the CleanDevelopment Mechanism: Why and What?". Dr. Ben-ito Müller’s web page on the Oxford Institute for EnergyStudies website. Retrieved 2010-04-20.

12 12 EXTERNAL LINKS

[52] “Carbon Retirement report: The Efficiency of CarbonOffsetting through the Clean Development Mechanism”.2009-12-07. Retrieved 2011-05-24.

[53] Kahya, Damian (2009-12-07). "'30% of carbon offsets’spent on reducing emissions”. BBC News. Retrieved2011-05-13.

[54] VODO vzw& 11.11.11. “CDM: schoon genoeg? Vlaamsen federaal CDM-beleid onder de loep”. Vlaams OverlegDuurzame Ontwikkeling. Retrieved 6 November 2011.

[55] Despines, M., Bullock, S., Childs, M., & Picken,T. [Friends of the earth: http://www.foe.org/sites/default/files/A_Dangerous_Distraction_US.pdf “A dan-gerous distraction: Why offsets are a mistake the U.S.can't afford to make"]. Friends of the Earth. Retrieved7 November 2011.

[56] Schneider, L. “Is the CDM fulfilling its environmental andsustainable development objectives? An evaluation of theCDMand options for improvement”. Institute for AppliedEcology. Retrieved 7 November 2011.

[57] Nina Chestney and John McGarrity (14 October 2011).“Analysis: U.N. carbon price set to fall further”. Reuters.

[58] UNEP Risø Centre. “CDM projects grouped in types”.CDMPipeline.org. Retrieved 6 November 2011.

[59] Schneider, L.; Lazarus, M.; Kollmuss, A (October 2010).“Industrial N2O Projects Under the CDM: Adipic Acid- A Case of Carbon Leakage?". Stockholm EnvironmentInstitute Working Paper WP-US-1006.

[60] Wara, M. W.; Victor, D. G. (April 2008). “A RealisticPolicy on International Carbon Offsets”. PESD WorkingPaper (74). Retrieved 7 November 2011.

[61] Haye, B. (November 2007). “Failed mechanism: Howthe CDM is subsidizing hydro developers and harmingthe Kyoto Protocol”. Internationalrivers.org. Retrieved7 November 2011.

[62] International Rivers. “Failed Mechanism: Hundreds ofHydros Expose Serious Flaws in the CDM”. Internation-alrivers.org. Retrieved 7 November 2011.

[63] Flues, F.; Michaelowa, A.; Michaelowa, K (2008). “UNapproval of greenhouse gas emission reduction projects indeveloping countries: The political economy of the CDMExecutive Board”. CIS Working Paper (35).

[64] Bachram, H. (2004). “Climate Fraud and Carbon Colo-nialism: The New Trade in Greenhouse Gases”. Capital-ism, Nature, Socialism 15 (4).

[65] Evans, J.P. (2012). Environmental governance. London:Routledge. p. 247.

[66] A New Initiative to Use Carbon Trading for Tropical For-est Conservation] William F. Laurance(2007), Biotropica39 (1), 20–24

[67] Stern, N. 2006. Stern Review of the Economics of Cli-mate Change

[68] Forests First in the Fight Against Climate Change, GlobalCanopy Programme, 2007

[69] Fogarty, David (Jul 12, 2011). “Carbon credits for In-dia coal power plant stoke criticism”. Reuters. RetrievedSeptember 18, 2012. ...five high-efficiency coal powerplants have been registered under the CDM -- four in In-dia and one in China -- meaning they are all eligible toearn CERs that they can sell.

[70] “Against Own Technical Advice, UN decides to subsidize,remove safeguards, for dirty coal power plants” (Press re-lease). CDM-WATCH. 13 September 2012. Retrieved10 October 2012.

[71] “Brazil’s Jirau hydro project world’s largest CDM-registered renewable plant”. Hydro World. 6 May 2013.Retrieved 30 Dec 2014.

[72] World Bank, State and Trends of the Carbon Market,2010

[73] http://www.wsrw.org/a105x2329

[74] CDM Gold Standard

[75] CDMProject 0177 Lawley Fuel Switch Project UNFCCC

[76] Carbon trade watch

11 Further reading

• Boyd, E. et al (October 2007). “The Clean De-velopment Mechanism: An assessment of currentpractice and future approaches for policy”. TyndallCentre for Climate Change Research. RetrievedSeptember 18, 2012.

• Hepburn, C. (November 2007). “Carbon Trading:A Review of the Kyoto Mechanisms”. AnnualReview of Environment and Resources 32: 375–393.doi:10.1146/annurev.energy.32.053006.141203.Retrieved May 20, 2009.

• The ultimate climate change FAQ (July 26, 2011).“What is the Clean Development Mechanism(CDM)?". The Guardian. Retrieved September 20,2012.

12 External links

• Home page of United Nations website on Clean De-velopment Mechanisms

• Capacity development for the CDM

• Spreadsheet of Hydro Projects in the CDM ProjectPipeline, International Rivers

• Clean Development Mechanism projects in &around India

• Designated National Authority of India for CDMProjects

13

• UN Clean Development Mechanism profile ondatabase of market governance mechanisms

14 13 TEXT AND IMAGE SOURCES, CONTRIBUTORS, AND LICENSES

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