Who will point out that the CDM emperor has no clothes?

From yesterday’s Sunday Times, more news that all is not well with the Clean Development Mechanism:

The legitimacy of the $100 billion (£60 billion) carbon-trading market has been called into question after the world’s largest auditor of clean-energy projects was suspended by United Nations inspectors. SGS UK had its accreditation suspended last week after it was unable to prove its staff had properly vetted projects that were then approved for the carbon-trading scheme, or even that they were qualified to do so.

It is a source of never-ending frustration to me that this dog of a policy mechanism was ever set up. The CDM, in case you haven’t had the delight of making its acquaintance, is a mechanism that’s supposed to allow developing countries to benefit from emissions trading – without having emissions targets.

If you’re wondering how that’s supposed to work, then join the queue. This is the other kind of emissions trading, the one that isn’t cap-and-trade. It’s called baseline-and-credit. What happens is that you look at (say) a factory where you’re about to install spanking new energy efficiency equipment. The idea is that you get issued with emission permits adding up to the level of emissions you’re saving by installing said technology. The problem, though, is that in order to do that, someone has to work out what the emissions would have been without it. And who the hell knows – really?

Back when the government set up the UK Emissions Trading Scheme in 2001 / 2002 (before it was superseded by the EUETS), I spent four surreal months as an official seconded in to Defra – where I was in charge of developing the baseline-and-credit part of the Scheme.  It was abundantly clear that it wouldn’t result in real emissions reductions. But companies loved it – as well they might. And as for the consultants charged with designing and accrediting the projects: it was Christmas.

Now, with the Clean Development Mechanism (CDM), it’s all gone global – and the same basic design problems are still, unavoidably, built in. So who has an incentive to say that the emperor wears no clothes?

Not developed country governments: they love the fact that it helps them to achieve their emissions targets cheaply (as you can see from the fact that a fifth of EUETS permits are from the CDM, or from the huge reliance on the CDM built into Waxman-Markey in the US). Not developing country governments: China and a couple of others are making money out of it, and the gripe you hear from the rest of them is not that the system is bust, but that they’re not getting a piece of the action. And certainly not the UNFCCC Secretariat (who are supposed to be impartial in all this): their little secret is that a levy on CDM transactions funds a lot of of jobs at their HQ in Bonn.

Which might leave you wondering why the NGOs don’t make more of a fuss.  Alas, it’s the same old story: their long-standing inability to decide what to think about the thorny issue of developing country participation in climate mitigation. Hamstrung by a rigid interpretation of what constitutes ‘equity’ for developing countries, none of them are willing to touch the question of quantified emission targets for poor nations. With targets out of the picture, they need some alternative storyline on how developing countries are supposed to reduce emissions and get access to clean technology – and so they end up cheerleading for the CDM, and persisting in the fiction that a few tweaks will be enough to resolve the fundamental design faults with the scheme.

So with no-one out there calling time on the CDM, Copenhagen will doubtless agree another ten years for this broken mechanism that delivers neither real emissions reductions nor real finance for development.

The tragedy here is that all the while, a far better solution to these challenges has been staring us in the face: get all countries involved in quantified targets, and deal with the equity issue by sharing them out on an equal per capita basis.  Presto: massive new source of finance for development, plus safely stabilised climate. But the longer we wait to do this, the more of a safe ‘emissions budget’ gets used up – and the less remains to be shared with developing countries when a worsening climate means it’s no longer avoidable for them to take on targets.

The CDM represents a collective unwillingness to face up to difficult issues in the hope that they’ll get easier with time.  Alas, the opposite is the case.