Revealed: ‘serious irregularities’ in the fight against climate change

The Guardian, June 2 2007

A Guardian investigation has found evidence of serious irregularities at the heart of the process on which the world is relying to control global warming.

The UN’s Clean Development Mechanism (CDM), which is supposed to offset greenhouse gases emitted in the developed world by selling carbon credits from cleaner projects elsewhere, has been contaminated by gross incompetence, rule-breaking and possible fraud, according to UN paperwork, an unpublished expert report and some alarming feedback from projects on the ground.

One very senior figure suggested that there may be faults with up to 20% of the Certified Emissions Reductions which have been sold. Since these are used by European governments and corporations to justify increases in their own emissions, the net effect is that in some cases malpractice at the CDM has had the perverse effect of adding to the net volume of greenhouse gases in the atmosphere.

The problems focus on the specialist companies who verify the Certified Emission Reductions which are supposed to be produced by CDM projects in the developing world. Three of those specialist companies have failed spot checks which revealed a catalogue of weakness. One of the CDM’s own experts calculates that as many as one third of the projects registered in India are commercial ventures which do not produce any additional cut in greenhouse gases and were wrongly approved by these specialist companies.

There are only seven of these verifying companies. Most of them have a clean track record and will have approved reliable emissions reductions, but three of them have been performing so poorly that the CDM’s executive board, which is based in Bonn, ordered spot checks – and all three companies failed on multiple grounds. The findings on one company, which is believed to have validated dozens of projects and verified millions of tonnes of carbon reductions, were so bad that the board considered completely suspending its right to work.

The chairman of the CDM board, Danish energy consultant Hans Jurgen Stehr, insisted that in the end the problem was not bad enough to require any of the companies to be suspended. However, he said: “This has been serious. We are talking about competence and the ability of the company to do a proper job.” Stehr has ruled that none of the three companies should be named, a decision which has angered some carbon traders.

Minutes from meetings of the CDM board express concern both about ‘validation’, when new projects are registered with the CDM; and about ‘verification’ when reductions in greenhouse gases are recorded. In the formal language of the UN, the minutes record findings for each of the three companies variously of “non-conformities regarding its competencies to perform validation and verification functions; its quality assurance and quality control mechanisms and compliance with the CDM requirements; procedural and operational requirements, such as its management and operational structure; contract control and compliance with its own stipulated procedures.” The board has called for a new regime of surveillance of the work of these companies.

One source who has been working closely with the CDM board had seen some companies filing reports with “all kinds of basic errors which make you wonder if they have any idea what they’re doing.” This included an entire report in a foreign language when basic rules require it to be in English; submitting a report containing remarks such as “we must check this before we submit the report”.

Other errors are said to be far more serious, including conjuring up numbers when projects on the ground failed to provide them; giving a green light to purely commercial projects which clearly make no contribution to reducing greenhouse gases; approving projects which were already in existence and cannot claim to be part of the drive to cut emissions.

Most of the concern is around the crucial CDM test of ‘additionality’, ie proof that a project is delivering cuts in greenhouse gases that would not otherwise have happened. One of the CDM board’s own expert advisers, Axel Michaelowa, in an unpublished report, examined all 52 Indian projects which had been registered up to May 2006 and found that a third of them failed this additionality test. Projects which are accepted can earn millions of euros from the sale of their emission reductions, and Michaelowa found evidence of projects supplying false information which was then wrongly accepted by the companies who were supposed to check it.

In one case cited in the report, he accuses an Indian company of making statements which were ‘blatantly false’, pretending that it could set up an energy-saving scheme only if it were authorised to sell emissions reductions when the reality was that it had been planning to do it for years because the energy-saving would improve its profits. Despite Michaelowa’s protests, that scheme was approved, first by the verifying company and then by the CDM board.

In another case, a group of Indian companies tried to register windmill projects. One of them blundered by publishing figures which showed that these were highly profitable commercial ventures which would be going ahead even if the CDM did not exist, and so it was rejected. And yet, Michaelowa found, all of the other windmill projects, which were just as commercial but had been more discreet about their profits, were accepted.

The verifying companies, he concluded, “have not been able or willing to thoroughly check the additionality arguments of project developers… We thus will get more non-additional projects from India registered in the future.”

Michaelowa spelled out the dangers: “The CDM as such does not reduce net greenhouse gas emissions. For every tonne of emissions reduced in a host country, an investor is allowed to emit one tonne more at home. If a CDM project does not reduce emissions compared to what would happen anyway, then the net effect is an increase in global emissions. It is not just that they do not contribute to overall greenhouse gas emission reduction; they actually will increase net emissions.”