Additionality cannot be taken out of the CDM, even if it is impossible to administer

Ken Newcombe, who founded the World Bank’s Carbon Finance Unit, yesterday described the concept of additionality in the Clean Development Mechanism as “impossible”.

A reduction in emissions is ‘additional’ if it would not have happened without the funding provided by selling carbon offsets through the CDM (mainly as Certified Emission Reductions in the EU ETS).

He rightly points out that additionality is very difficult to measure and has added significantly to the administrative costs of verifying CDM projects. Instead, he proposes a ‘benchmarking’ approach, in which activities that ‘emit below the benchmark’ are allowed to sell offsets.

The thing is, additionality is the basic premise of offsetting. To claim that an investment will reduce emissions by a specific quantity, you must measure the baseline (what would have happened without intervention).

If the CDM is not necessarily additional (which it is not now, but at least it aims to be), emissions will leak out of statutory cap-and-trade schemes like the EU ETS in unknown quantities. Not only that: unknown quantities of money will leak out too as projects that would have happened anyway are given unnecessary funding.

Perhaps the CDM is not the right way to transfer clean technology to the developing world. In fact, CDM is a misnomer – it is not primarily designed to foster clean development, but to reduce the costs imposed on the developed world by the Kyoto Protocol.