CDM criticism heating up – non additionality could wipe out reductions in the EU ETS

The Clean Development Mechanism is receiving criticism from high profile quarters. The cover story in yesterday’s Guardian was “billions wasted on UN climate programme”, which drew evidence from studies by International Rivers (pdf) and Stanford University’s David Victor and Michael Wara (pdf).

Victor and Wara’s study is worth reading. Once again, additionality is identified as the main issue.

All new hydro, wind, and natural gas fired capacity [in China] is applying to claim credit for emissions reductions under the CDM… Under the rules of the CDM, each new dam, wind farm, or natural gas power plant applies individually and makes the argument that it would not have been constructed but for the financial incentives produced by the sale of carbon offsets… Taken collectively … these individual applications for credit amount to a claim that the hydro, wind, and natural gas elements of the power sector in China would not be growing at all without help from CDM. This broader implication is simply implausible in light of the state policies [to support clean generation].

…At root, the CDM and other offset schemes are unable to determine reliably whether credits are issued for activities that would have happened anyway while also keeping transaction costs under control and assuring investor certainty…The CDM is structurally unable to engage developing countries in ways that would actually make a dent in emissions.

Victor believes that between one and two thirds of reductions made by the CDM would have happened anyway. The EU ETS allows the EU to purchase 278 million CERs per year, or 13.4% of the overall cap. If one to two-thirds of those CERs are not additional, between 93Mt and 186Mt of CO2e would leak out per year. To put that in perspective, the reduction between 2005 emissions and the annual Phase 2 cap – 131Mt – is well within that range.

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