Down the rabbit hole: REDD in the CDM?

At the end of last week, the number of credits issued under the Clean Development Mechanism reached one billion. ““This exciting milestone is a testament to the expanding use of the CDM,””, according to Christiana Figueres, the UNFCCC’s Executive Secretary.

In a press release, Figueres explaines that,

““The CDM is not only having an important impact on developing countries through technology transfer and sustainable development, but it can also encourage developed countries to increase their emission reduction targets by making mitigation more affordable.””

Obviously, Figueres doesn’t mention that almost one-third of all CERs issued were for industrial gas reduction. Or that factories in China and elsewhere have manufactured HCFC-22 and its HFC-23 by-product just to cash in on the payments for HFC-23 offsets through the CDM.

Equally obviously, Figueres is not keen to discuss the human rights abuses such as the death threats, kidnappings, disappearances and killings associated with a palm oil biogas CDM project by a company called Grupo Dinant in Honduras. Or the poisonous gas that continues to leak out of the Bisasar Road landfill site in Durban, South Africa. The rubbish dump should have been shut down a decade ago, but is still in operation, thanks to a World Bank loan and the subsequent CDM credits for burning the methane that is emitted from the rubbish to generate electricity.

But the second part of Figueres’ comment is pure fantasy. If the CDM encourages rich countries to increase their emission reduction targets, then why didn’t the North agree to do just that in Copenhagen, Cancún or Durban? As Figueres knows, carbon trading has, from the start, been linked with reduced emission targets. In 1997 at Kyoto, the US negotiators (led by Al Gore) first managed to slash the target for emission cuts and then insisted on the inclusion of carbon trading in the Kyoto Protocol.

Figueres often responds to comments on her twitter account, so I asked her for the evidence to back up her statement:

I’m still waiting for a response from Figueres. Or anyone else, for that matter.

Figueres’ optimism about the CDM is not shared by a High-Level Panel on the CDM Policy Dialogue that released its report earlier this week. The Panel’s report announces that, “the CDM has essentially collapsed”. The report notes three threats: climate change, the inadequacy of international climate action, and the collapse of the global carbon markets. Despite the fact that carbon markets cannot address the threat of climate change, the report focusses on rescuing carbon markets.

The High-Level Panel’s proposal is that Governments should step in and bail out the carbon markets, by setting up “one or more funds to purchase carbon credits and stabilize carbon prices in order to restore market confidence about future prices”. As CDM Watch points out, this would create windfall profits for industrial gas projects. CDM Watch Director Eva Filzmoser says,

“[I]t does not make sense to save the CDM for its own sake and potentially at the expense of tax-payers. Much larger emission reductions can be achieved by directly supporting new and effective climate policies.”

The report also suggests including REDD in the CDM, quietly brushing aside the problems of leakage, additionality, baselines, and permanence. This would lead to the generation of yet more carbon credits that do not actually reduce emissions. The report recommends that, “Low-cost mitigation opportunities through REDD+ should be introduced on a trial basis.” The report makes no mention of the problems associated with REDD as an offset mechanism, such as the difficulties of establishing the ownership of forest carbon, the way that a focus on carbon is distorting the “readiness” preparations for REDD, or the fact that of the one billion CDM credits that have been issued, less than 1% came from afforestation and reforestation projects – a clear indication of the difficulties associated with this sort of project.

Below are two extracts from the report discussing the potential inclusion of REDD in CDM:

REDD+

[1]

REDD is an acronym for “Reducing Emissions from Deforestation and Forest Degradation”, and the “+” symbol refers to supplementary activities such as the sustainable management of forests and the enhancement of forest carbon stocks. A major source of global greenhouse gas emissions comes from poorly managed forests and deforestation practices. However, for a variety of technical and political reasons, the inclusion of such activities within the scope of international carbon markets has been uncertain. The CDM currently excludes all land use, land-use change and and forestry activities, with the exception of afforestation and reforestation activities.

A number of national governments and think-tanks argue that technical problems have been solved and many of these reasons are now obsolete. A number of countries have joined in partnerships to develop REDD+ initiatives, sponsoring major programmes for the protection of forests. Market-based initiatives for the crediting of REDD+ projects and programmes are proceeding, albeit outside the Convention, such as through initiatives linking up emissions trading systems in North America and REDD+ programmes
in the Amazon rainforest.

The inclusion of REDD+ activities in the CDM has potential benefits and risks:

• Potential benefits include: promoting sustainable development; shifting the distribution of CERs towards a more equitable balance among countries (as several forested developing countries do not have many opportunities in other sectors); creating further options for generating cost-effective reductions; and facilitating learning-by-doing for how to include REDD+ in carbon markets.
• Potential risks include: oversupplying the market and further decreasing CER prices; harming local communities and indigenous groups if not implemented with appropriate safeguards, particularly in respect of land tenure.

Careful design should be able to mitigate many of the risks associated with including REDD+ in the CDM. As such, limited project-based REDD+ and/or larger-scale (sub-national or national) pilot activities should be allowed into the CDM. Doing so would create important learning-by-doing opportunities for the international community in anticipation of future REDD+ mechanisms, which may accelerate their development.

Including REDD+ in the CDM would also help direct CDM projects and programmes toward nations that might not otherwise participate in the sustainable development benefits
of the CDM and might not otherwise gain experience with carbon markets.

[ . . . ]

Some stakeholders question the possible inclusion of REDD+ in the CDM on the grounds of additionality hurdles and technical challenges. Others argue that the inclusion of REDD+, with its lack of institutional development and acceptance, may reduce the credibility of the CDM. Also, they suggest that an influx of REDD+ CERs would drive prices down, further endangering the credibility of the CDM market. Some stakeholders do, however, see a future for REDD+ in the CDM: it could create a stable, low-cost source of future CERs. Others maintain that, instead of taking up all activities within the scope of REDD+, development of those activities already covered by the CDM in afforestation and reforestation should be pursued further.

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[1] Data and numbers presented in this section are derived from the CDM Policy Dialogue research, summarized in: High-Level Panel on the CDM Policy Dialogue: Research report: The future context of the CDM (2012)