The carbon corruption: Iran, Sudan, and North Korea get millions in U.N. carbon credit funds

I am not a fan of the CDM process as it has a lot of problem such as encouragement for deforestation, etc. However, I am wondering how many of the discussants have read the text and procedures of the CDM process. First, the CDM is an initiative of a private company in the Annex I or developed country with a project in a developing country. So the first point of scrutiny is the company in a highly democratic, transparent, saintly, incorruptible country initiating projects with those countries mentioned in the article. Second, while there is a self CDM process, the cost is quite high especially if the methodology is not developed. Third, the process is not as simple as a registration of any project. The project has first to be certified by an operational entity and because of the complexity of getting accredited as an operational entity, almost all of the operational entities are from the incorruptible, democratic, and democratic western countries in the Annex I. Fourth, before the credits are registered and certificates issued, the project emission reduction from the baseline is validated by the same or another operational entity. Fifth, not all carbon credits have the same price. On the broader scheme, carbon credits from countries with high risks would command a low price compared to credits coming from stable, transparent and democratic countries. There is a high risks that the operational entity might be validating the project reduction based on false data or other factors. Six, it is a company in a democratic, incorruptible western democracy who buys the credits and pays for it. So if the western company does not want to pay a cent for the CDM credit from those countries listed in the above article, the credits have no value. The UN actually collects money from the sale of the credits to cover the overhead and as well as for special adaptation funds. Lastly, when the western company operating in an incorruptible, transparent and democratic western country is going to register the credits purchased in their country registry, the incorruptible, transparent and democratic western government could impose all the bureaucratic red tapes in registering CDM credits from those countries that for all intent and purposes, the company initiating or purchasing the credits would have second thoughts. What is lacking in the article, is the list of companies from incorruptible democratic western countries initiating the CDM projects in those countries mentioned and the operational entity.

For more background on this issue, read
“The European Emissions Trading Scheme”
http://scienceandpublicpolicy.org/originals/emissions_trading_scheme.html
“Another Day Another Dollar – CFC’s And The UN”
http://scienceandpublicpolicy.org/originals/another_day_another_dollar.html
“A Nest of Carbon Vipers” http://sppiblog.org/news/a-nest-of-carbon-vipers

Old engineer– Under Kyoto Protocol each country has an assigned reduction although as an exception Australia is allowed to increase its emission by 8 per cent. If you run a power plant that generates 2,000,000 tons of CO2 per year and your country is committed to reduce its emission by 5 per cent, you are given a certificate to emit 1,900,000 tons and to produce a certificate to cover the 100,000 tons. If you own a very old plant with a very low efficiency you could reduce it to say 1,700,000 tons per year you have 200,000 tons of certificate that you could sell in the market. If you have already an efficient plant and you could not reduce your emission anymore, you could buy from the old plant owner 100,000 of his 200,000 surplus from the market. The certificates have to be registered in the country’s national registry to be valid and reflected in the UNFCCC country registry as well. If you are manufacturer of a say super critical boilers and would like to sell it to a electricity authority in a developing country, you initiate a CDM project with the authority. The project gets an operational entity (OE) to do the design or methodology, register it with the CDM board and when it operational the OE validates and calculate the actual emissions above the agreed baseline. The CDM board issues a certificate emission reduced in the registry of the country hosting the CDM. As manufacturer of the super- critical boiler, you may agree to get part of your payment in certificates ( after you have over priced your boilers) and request for transfer of the certificate to your country’s registry. If you got say 300,000 tons of credits you could sell this in the market or negotiate with the power plant owner who needs 100,000 of credits. The power plant owner will naturally prefer to buy the 100,000 tons from the other power plant owner who have a surplus of 200,000 rather than the manufacturer of the super critical boiler. First, he knows them personally, they belong to the same association and they are covered by the same laws if there are problems with the credit certificate. So the owner of the 300,000 tons credit will give a hefty discount say 50 per cent so the power plant needing 100,000 tons will only pay half the price. If the developing country has a good reputation the discount could be just 10 % or running to 90 % if the developing country has such a bad reputation. After all, the 300,000 tons out of which he gets his 100,000 is already registered in his country’s registry. Some companies initiates the CDM themselves to avoid the pitfalls of getting certificates of doubtful value. In addition to CDM, there is joint implementation or JI which is between one annex I country to another, say Germany and another member of the EU. JI credits normally command a better price than CDM credits. Then there is the “hot air” credits, which are credits earned by Annex I like the Russia when their emission went down because of economic downturn. The EU has decided not to touch those hot air credits. As you will note the impact on the power plant is only 5 % if he buys it from the other power plant who has a surplus, 2.5 % if he uses CDM with 50 per cent discount. Compared to the overall cost of running the power plant, the reduction would be around 0.1 per cent increase. Australia would be the first Annex I country who will tax 100 per cent of the emissions at rates higher than the current market rates of the carbon credits. Australia would be an interesting place to track in the next few months.

Fifty percent funded by the USA – isn’t there a law or a sanction on this transfer of cash?