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How additional is the Clean Development Mechanism? Analysis of the application of current tools and proposed alternatives. Study prepared for DG CLIMA.
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... This is due to the strong likelihood of miscalculating emissions avoided through fossil-power displacement or their weak additionality, since revenue from renewable electricity rather than offset sales is usually the decisive factor for investments. Numerous studies confirm the high likelihood of such problems ocurring 12,13,50,51 . Furthermore, renewable electricity has become competitive relative to fossil fuels around the world due to declining costs and supportive government policies 52 . ...
... Norwegian CL, a global cruise operator, sourced more than half its offsets from hydropower while Banco BV and Chevron each retired 2.99 MtCO 2 e and 1.38 MtCO 2 e. However, hydropower projects are highly unlikely to be additional, since most receive government support as infrastructure projects and are built regardless of the opportunity to capture extra revenue through offset sales 50 . As a result, hydropower projects are no longer allowed to register on VCS and are prohibited under a number of emissions trading schemes 53 and best-practice VCM frameworks 54 . ...
... In a complementary analysis, we examine the attractiveness of Brazil's, China's and India's policy environment for renewable energy diffusion, since research and registry principles consider a weak policy environment a critical indicator of a project's additionality 58,50 . Specifically, we compare each country's annual score from the World Bank's regulatory indicators for sustainable energy (RISE) project 59 , which evaluates the effectiveness of renewable energy policies, to the average score of OECD nations. ...
Most companies include carbon offsets in their net-zero strategy. However, many offset projects are poor quality and fail to reduce emissions as claimed. Here we focus on the twenty companies retiring the most offsets from the voluntary carbon market over 2020–2023. We examine if their offsets could be considered high quality and likely to benefit the climate. We curate an original company-level dataset to examine quality and climate benefits across four dimensions: (1) use of offsets from low/high-risk project types; (2) age of projects and credits; (3) price of credits; and (4) country of implementation. We find that companies have predominantly sourced low-quality, cheap offsets: 87% carry a high risk of not providing real and additional emissions reductions, with most offsets originating from forest conservation and renewable energy projects. Further, most offsets do not meet industry standards regarding age and country of implementation. These findings provide further evidence that the voluntary carbon market is not supporting effective climate mitigation. Particularly, we show that its persisting quality issues are exacerbated by the demand for low-quality offsets by individual companies.
... for International Aviation. There is already a large and growing body of evidence suggesting offset schemes are frequently plagued by integrity issues (Schneider & Kollmuss 2015;Badgley et al. 2022;Stapp et al., 2023;Cames et al. 2016;West et al. 2020;2023;. The focus on compliance failures in this study adds to a new dimension to the literature, showing how integrity problems can arise from the maladministration of methods and associated breakdowns in governance processes. ...
The boom-and-bust nature of rangeland ecosystems makes them ill-suited to nature-based solution (NbS) carbon offset projects involving sequestration in vegetation and soils. The variability in these systems makes it difficult to determine whether observed stock changes are attributable to the project activities, creating additionality risks. The low and variable rainfall in rangelands also means stock increases will often be impermanent, being susceptible to reversals in droughts, a risk magnified by climate change. The vast areas and small potential for gains per unit area add further complications, making it difficult to accurately measure carbon stock changes at low cost. This creates pressure to trade accuracy for simplicity in measurement approaches, increasing the risk of measurement errors. Despite these risks, rangelands have been advanced as a location for offset projects because of low land costs and low opportunity cost, and a perception they are extensively degraded. The most prominent example globally is human-induced regeneration (HIR) projects under the Australian carbon credit unit (ACCU) scheme, which are purporting to regenerate permanent even-aged native forests (areas with ≥20% canopy cover from trees ≥2 metres high) across millions of hectares of largely uncleared rangelands, predominantly by reducing grazing pressure from livestock and feral animals. Existing research has shown limited forest regeneration in the credited areas of these projects and that most of the observed changes in tree cover are attributable to factors other than the project activities, most likely variable rainfall. Here we extend this research by evaluating compliance of a sample of 117 HIR projects with regulatory requirements. The results suggest most HIR projects are non-compliant with key regulatory requirements that are essential to project integrity. The findings point to major administrative and governance failings in Australia’s carbon credit scheme.
... Among other issues, the instrument did not manage to overcome two key challenges: Its economic incentives were diluted by certificates from cheap emissions reductions of GHG other than CO 2 , and the governance on additionality and counterfactual baseline emissions was not robust enough to prevent circumvention (Wara, 2007;Gillenwater and Seres, 2011). As a result, certificates were generated and sold internationally, but -in reality -failed to deliver additional emissions reductions at the anticipated scale (He and Morse, 2013;Cames et al, 2016). Not suprisingly, this has fueled concerns about creating global trading regimes for removal certificates. ...
... Additionality, which is about assessing the causal relationship between the mitigation activity and the overarching policy intervention that is supposed to have incentivized it (Gillenwater, 2012), has already been a concern in the past. In the context of the CDM studies found that additionality was already considered highly questionable for the majority of projects analyzed while emission reductions and removals were often overestimated (see, e.g., Calel et al., 2021;Cames et al., 2016). Similar observations were made regarding credits eligible for offsetting under California's cap-and-trade program, where academic research found systematic over-crediting of forestry credits while the introduction of standardized approaches for mine methane capture and rice cultivation projects could minimize but not eliminate the risk of over-crediting (Badgley et al., 2022;Haya et al., 2020). ...
This focus article traces the evolution of the voluntary carbon market (VCM), putting emphasis on the more recent developments following the adoption of the Paris Agreement in 2015. It focuses on the interplay between the privately governed VCM and the global climate regime under the United Nations (UN). For years, the VCM and the UN carbon market operated in parallel and mutually influenced each other. The adoption of the Paris Agreement, however, marked a turning point for the VCM. It triggered the proliferation of net zero targets, sparking the interest in the VCM as a supplier of carbon credits to offset companies' remaining emissions. At the same time, the global scope and ambitious targets set by the agreement have put the future of the VCM in limbo, raising concerns about double claiming and more generally, questioning the adequacy of offsetting. Considering these challenges, numerous stakeholders have started a process to redefine the rules of the market to ensure its credibility and legitimacy. While some areas of convergence were identified, the VCM's private governance has long been unable to address the question of how to deal with double claiming and the claims companies should be allowed to make. In this situation, signals from international policy and regulation under national policy point the way forward for the VCM. By moving from offsetting toward a contribution claim model, the VCM may overcome its “identity crisis” and find a new place within the broader climate change regime.
This article is categorized under: The Carbon Economy and Climate Mitigation > Policies, Instruments, Lifestyles, Behavior
Policy and Governance > Multilevel and Transnational Climate Change Governance
Policy and Governance > Private Governance of Climate Change
... The results add to the growing literature highlighting the practical limitations of offsets and the potential for offset schemes to credit abatement that is non-existent, non-additional, and potentially impermanent [13][14][15][16][17][18][19][20][21][22][23][24][25] . They also serve as a reminder of why offsets are considered a high-risk policy instrument 10,72,73 . ...
Carbon offsets are a widely used climate policy instrument that can reduce mitigation costs and generate important environmental and social co-benefits. However, they can increase emissions if they lack integrity. We analysed the performance of one of the world’s largest nature-based offset types: human-induced regeneration projects under Australia’s carbon offset scheme. The projects are supposed to involve the human-induced regeneration of permanent even-aged native forests through changes in land management. We analysed 182 projects and found limited evidence of regeneration in credited areas. Changes in woody vegetation cover within the areas that have been credited also largely mirror changes in adjacent comparison areas, outside the projects, suggesting the observable changes are predominantly attributable to factors other than the project activities. The results add to the growing literature highlighting the practical limitations of offsets and the potential for offset schemes to credit abatement that is non-existent, non-additional and potentially impermanent.
... Protocol to allow developed countries to buy emissions reductions from developing countries in the form of credits. The inclusion of large-scale hydropower projects in the CDM is criticized due to the environmental and social impacts of dams, and the failure to meet additionality criteria, i.e., that the emissions reductions would not have happened without the mechanism (Cames et al., 2016;Haya & Parekh, 2011;Koo, 2017). The construction of the Hidrosogamoso dam was nearing completion when the Colombian government approved its application to the CDM in 2013, so it seems clear the project would have gone ahead with or without financing from carbon credits. ...
In the context of the global climate and ecological crisis, increasing pressure on governments and the private sector to act, combined with inertia and resistance to transformative change, has led to a new form of extractivism. Green extractivism refers to actions or activities that are promoted as environmentally sustainable but that rely on or facilitate the unsustainable extraction of natural resources. Conservation tools such as environmental offsets are embraced by governments and the private sector as a solution to address the contradictions between economic development and environmental conservation. How do such conservation measures play out in places afflicted by a history of armed conflict? Examining the evolution of environmental compensation policy in Colombia and a case study of the Hidrosogamoso dam, this article explores multiple manifestations of green extractivism intertwined with armed neoliberalism. These include the creation of biodiversity and carbon sacrifice zones that facilitate the concentration of land and the capture of natural assets; the promotion of green narratives that distract from the extensive social and ecological impacts; and the use of violent tactics to quieten dissent from local communities and environmental defenders.
... As part of the package, the CDM promises to address development priorities and activities, which incentivizes poor nations to participate. This acknowledges that global climate protection will remain a challenge for all nations unless they can achieve sustainable development [4]. ...
The Kyoto Protocol established the Clean Development system (CDM), a cooperative system that might help developing nations achieve sustainable development by encouraging environmentally conscious investment from firms and governments in affluent nations. An overview of the CDM's history, composition, and project cycle is given in this publication, which also looks at the benefits and potential value for participating developing nations like India. The Ozone layer is being weakened by pollution brought on by an increasing population. On our earth, every species is in danger of being extinct. The primary conclusions are: With the aid of the Kyoto Protocol, three formal methods for global emission reduction were established: Joint Implementation (JI), Clean Development Mechanism (CDM), and International Emissions Trading (IET). It raises public awareness, and with the aid of certified emission reduction units, some environmental organizations developed the idea of carbon trading. The CDM offers both industrialized and developing nations a win-win scenario. Businesses in India such as Gujarat Fluoro Chemicals, Tata Steel, NTPC, ONGC, and others can obtain several facilities abroad by using CERs. Through the exchange of credits and reduction of GHG emissions, carbon trading and CER "claims" to avert the impending disaster. Therefore, it can be concluded that imposing carbon prices with refunds is an effective strategy to address the pre-existing issue.
Since reducing greenhouse gas (GHG) emissions is a worldwide public good and the location of emission reductions has no bearing on the global stock of GHG, the CDM's premise is that reductions in emissions should be made where they can be done for the least amount of money. The findings shed light on potential difficulties in navigating market mechanisms in the future and show how the Carbon Offset Management (CDM) program has provided nearly 20 years of knowledge and expertise in the area of global carbon offset governance.
Wide use of compact fluorescent lamps (CFLs) offers opportunity for residential savings with favourable environmental benefits. The size of the South African residential market shows that there are strong opportunities to be optimised. To exploit such opportunities, it is important to look at strategies that influence independent and interdependent consumer choice in lighting, and to examine how far these strategies have been successful in promoting the market penetration of CFLs. While this is so, there are some areas of concern about the performance of the product that have to be addressed, as well as need for public action arising from external diseconomies of consumption.
Suppressed Demand refers to a situation where Minimum Services Levels (MSL) necessary for human development are unavailable to people or only available to an inadequate level. Numerous barriers, such as low income levels or lack of infrastructure and skills prevent access to MSLs, such as potable water, cooking energy, lighting and electrification. We investigate the concept of suppressed demand as it applies to Clean Development Mechanism (CDM) and market based incentives for GHG emission reductions. We argue that carbon markets have shown significant and catalytic potential for project development so far, but they have had limited impact on the poor, as the poorest tend to emit least. Including "suppressed demand" is in line with the objectives of the CDM and can go some way to re-balance the CDM as the development mechanism it was intended to be, and to make it relevant for the poor. Moreover, it is in fact necessary in terms of climate change limitation, as it is necessary to include low emissions areas into emission trading regimes and to incentivize lower emissions growth in poor regions. Through three case studies of CDM relevant development projects that deal with MSLs, we find that current CDM methods do not adequately address suppressed demand and that simple, transparent and common changes to assessment methods can have a significant impact on the leverage potential of these projects in the carbon market. Including "Suppressed Demand" in the CDM in the ways suggested can therefore facilitate project development in low emissions regions, by making it financially viable, and thereby avoid GHG emissions in the future.
When carbon credit is granted for projects that would occur irrespective of any subsidy based on mitigation of global warming, the projects generate "hot air," or credit without a real climate benefit. This is the case for tropical hydroelectric dams, which are now a major destination for funds under the Kyoto Protocol's Clean Development Mechanism (CDM). The countries that purchase the credit generated by dams can emit more greenhouse gases without their being offset by genuine mitigation. The limited funds available for mitigation are also wasted on subsidizing dams that would be built anyway. Tropical dams also emit substantially more greenhouse gases than are recognized in CDM accounting procedures. Tropical hydroelectric emissions are also undercounted in national inventories of greenhouse gases under the United Nations Framework Convention on Climate Change, giving them a role in undermining the effectiveness of as-yet undecided emission limits. Brazil's Santo Antnio Dam, now under construction on the Madeira River, provides a concrete example indicating the need for reform of CDM regulations by eliminating credit for hydroelectric dams.
In order to reach a goal of universal access to modern energy services in Africa by 2030, consideration of various electricity sector pathways is required to help inform policy-makers and investors, and help guide power system design. To that end, and building on existing tools and analysis, we present several ‘high-level’, transparent, and economy-wide scenarios for the sub-Saharan African power sector to 2030. We construct these simple scenarios against the backdrop of historical trends and various interpretations of universal access. They are designed to provide the international community with an indication of the overall scale of the effort required – one aspect of the many inputs required. We find that most existing projections, using typical long-term forecasting methods for power planning, show roughly a threefold increase in installed generation capacity occurring by 2030, but more than a tenfold increase would likely be required to provide for full access – even at relatively modest levels of electricity consumption. This equates to approximately a 13% average annual growth rate, compared to a historical one (in the last two decades) of 1.7%.
We demonstrate and apply methods for assessing global, system-scale effects on energy and greenhouse emissions of offset programs that explicitly consider the rules by which energy-based offset credits are awarded. We compare our approach to idealized calculations in which all regions, including those without mitigation obligations, face a common carbon tax. We find a substantial gap between potential reductions in emissions and those realized in a suite of hypothetical offset assignment protocols as well as between offset creation and system-scales emissions mitigation, even when project-scale additionality and compliance issues are absent and baselines are known with certainty. In the worst cases, seemingly reasonable rules were counterproductive—i.e. increased global carbon emissions, despite strictly meeting additionality and baseline requirements. But, even when we modified the rules for creating offsets to reflect more closely implementation practices, there remained a large gap between potential and realized mitigation. This difference is systemic and traces to the basic nature of offsets. Offsets subsidize the deployment of non-emitting technologies instead of penalizing the use of emitting technologies. As a consequence, offsets lower the cost of energy, and encourage greater use energy rather than its conservation. Thus, even in well-crafted programs, it is impossible to capture the full economic potential because the program lacks a means by which to engage energy conservation. We demonstrate that while offsets programs reduce the cost to regions with emissions caps, they may achieve this result at the expense of reduced global emissions mitigation.