The Carbon Offset Sausage Factory
For quite a while, I have been arguing that cap-and-trade schemes are inferior to straight carbon taxes because of their susceptibility to rent-seeking and manipulation. At the top of the list of problems is the carbon offset issue, the notion that someone can create and sell an offset to cap limits by reducing CO2 emissions in some novel way. The offset products that exist to day are tremendously suspicious, as I wrote here and here. In particular, the ability to resell the same emission reduction multiple times is a real danger.
The Guardian has an interesting look at the offsets being created by that bastion of good governance and management science, the United Nations.
The world's biggest carbon offset market, the Kyoto Protocol's clean
development mechanism (CDM), is run by the UN, 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 US, 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, have often been achieved at a
stunningly high cost: billions of pounds could have been saved by
cutting the emissions through international funds, rather than through
the CDM's supposedly efficient market mechanism.
The key problem, as I have pointed out before, is how do you know the reduction is truly incremental? How do you know that it would not have occured anyway:
The world's biggest carbon offset market, the Kyoto Protocol's clean
development mechanism (CDM), is run by the UN, 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 US, 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, have often been achieved at a
stunningly high cost: billions of pounds could have been saved by
cutting the emissions through international funds, rather than through
the CDM's supposedly efficient market mechanism....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 were already 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.
LOL, yes that might be a good indicator something is amiss. The other problem, beyond the staggering amount of outright corruption one would expect from any UN-operated enterprise, is this oddity:
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
4,000MW coal plant on the coast of Gujarat, India, is expected soon to
apply for CERs. The plant will spew into the atmosphere 26m tonnes of
CO2 per year for at least 25 years. It will be India's third - and the
world's 16th - largest source of CO2 emissions.
So nuclear plants, the one proven economic and scalable power technology that is free of CO2 emissions is the one technology that is excluded from the program? But 4,000MW coal plants that can proves they are marginally more efficient than they might have been are A-OK?
