Stockholm Environment Institute: Carbon credits undercut climate change action

carboncreditcertificate

Guest essay by Eric Worrall

A report by the Stockholm environment institute claims that a UN carbon credit scheme “significantly undermined” efforts to tackle global warming.

According to the BBC;

The vast majority of carbon credits generated by Russia and Ukraine did not represent cuts in emissions, according to a new study.

The authors say that offsets created under a UN scheme “significantly undermined” efforts to tackle climate change.

The credits may have increased emissions by 600 million tonnes.

In some projects, chemicals known to warm the climate were created and then destroyed to claim cash.

As a result of political horse trading at UN negotiations on climate change, countries like Russia and the Ukraine were allowed to create carbon credits from activities like curbing coal waste fires, or restricting gas emissions from petroleum production.

Read more: http://www.bbc.com/news/science-environment-34042115

Click here to read the Stockholm Environment Institute press release

This is not the first time carbon credit suppliers have been accused of gaming the system. The BBC article cites a story from 2010, in which the EU strongly criticised Chinese carbon credit suppliers.

Chinese chemical companies’ use of offsets has a ‘total lack of environmental integrity’, says Connie Hedegaard

Damian Carrington in Brussels

The European commission is planning to clamp down on a £1.6bn carbon trading scam. The use of carbon permits from industrial gas projects in China could be banned because of their “total lack of environmental integrity”, the climate change commissioner, Connie Hedegaard, has told the Guardian.

Read more: http://www.theguardian.com/environment/2010/oct/26/eu-ban-carbon-permits

The BBC article reports that Russia strongly rejects claims that many Eastern projects broke the rules;

Michael Yulkin, from Russia’s Environmental Investment Centre rejected the idea that many of these Eastern projects broke the rules.

“That’s just not true,” he told BBC News.

“All the projects have been validated and the additionality has been proved – it was all following the rules and if the rules allowed them to be in, so you have them in.”

Why are carbon markets so susceptible to fraud and sharp trading? I have a theory. In a normal market, fraud damages the financial interests of at least some of the participants, so there is a strong incentive to report fraud to the authorities, to punish fraudsters, and to recover stolen assets.

But in a carbon market, most market participants actually benefit from fraud. The sellers of carbon credits benefit when they sell fraudulent credits, because they are making money for nothing. The buyers of carbon credits benefit from a market flooded with fraudulent carbon credits, because the oversupply caused by fraudulent credits helps to keep prices down. Corrupt officials benefit financially, when they receive bribes to ignore the fraud. The only people who are disadvantaged by carbon fraud, are investors who tried to follow the rules, to produce “genuine” carbon credits, and politicians and activists who naively expected the carbon market to deliver emissions reductions.

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59 thoughts on “Stockholm Environment Institute: Carbon credits undercut climate change action

  1. Or perhaps all commodity markets are fiddled and the Carbon Market only attracts the second rate players.
    So they are easier to catch.

    • Commodity markets always carry the implicit requirement to deliver something to somebody somewhere.
      Carbon Markets require on promises delivered to someone in no particular place.
      How are you going to check that a forest in indonesia ‘promised’ to not be cut down hasn’t been promised 15 times already?
      You can’t promise delivery of a gold bar 14 times and not get found out. That’s the difference.

    • The other alternative is that this is a fake market. There is no real demand for other people to reduce carbon and the supply is not scarce. At this moment, I am not burning coal although I could be.
      The only demand for carbon credits that is not ginned up is guilty liberal politicians who live in one or more great big houses that spew lots of carbon and want to buy an indulgence. “See, I’m carbon neutral.”

    • Do you have any evidence of this corruption, or is it merely your innate distrust of things not run by govt coming to the fore again?

  2. The only people who are disadvantaged by carbon fraud, are..and politicians and activists who naively expected the carbon market to deliver emissions reductions….
    Politicians and activists AREN’T disadvantaged by the failure to deliver reductions. So long as they can claim the CO2 figure is high, they get to keep their jobs….

    • iThere are four ways to spend money. You can spend your own money on yourself. When you do that, why you really watch out for what you’re doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well then, I’m not so careful about the content of the present, but I’m very careful about the cost. Then, I can spend somebody else’s money on myself. And if I spend somebody else’s money on myself, then I’m going to have a good lunch! Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it costs, and I’m not concerned about what I get. And that’s government. And that’s close to 40 percent of our national income.
      – Milton Friedman

  3. Trust the Russians to game the system, stitch people up like kippers and then outright deny it when they get fingered.

    • Some years back, remember the steel Plant in Britain that was closed to make an almost 3/4 Billion in profit. Wasn’t Tata the owner and Pachauri was somehow involved with Tata. A new Steel plant was then constructed in India. Britain lost all the jobs.

      • I remember that, TATA got carbon credits to sell for closing the UK plant and development aid for the new plant in India. Real scandal at the time, billions of dollars assistance from UK and EU taxpayers to send jobs offshore.

  4. I like the Nigerian CCN system. None of this is any shonkier than other carbon offset schemes – just funnier.
    “Activate your account by purchasing your ‘Carbon Offset Green-Pack’ (N60, 000) – A demonstration you are a Carbon Neutral Citizen. You will start to make money and grow in influence as this qualifies you as a full member of CCN. You will not need to pay any money again and no monthly membership fee.”
    The US $300 will also buy you some CFLs, solar lanterns and cans of Bio Gel stove fuel. It’s all included, and you can resell the items – though maybe not for $300. It seems the big bucks come from joining up other Nigerians to CCN. It’s probably like Amway and Avon, where new recruits run around pestering relatives and friends to buy stuff they would otherwise not buy. When the recruit runs out of relatives and friends…time for new recruit. No shopfront needed.
    Hilariously, a lot of African carbon offsets originate from building supercritical coal plants (or promising to build ’em – I dunno!) and those carbon offsets are snapped up
    cheap by European coal power producers. (Gotta be cheap, because Brussels and Strasbourg need Germany to keep buying the drinks, so they keep that free market carbon price in the toilet.)
    So funny. Expensive, crippling even. But funny.

    • Quoting a comment I saw from another web site, years ago:
      “Carbon offsets.
      They magically allow you to pollute all you want.
      I also purchase Rape Offsets.
      By contributing cash to women’s abuse causes it allows me several guilt-free rapes of random women every year.
      You guys should check it out, man!
      Cool deal, for real!”

      • That was insensitive. Accurate, I know, because that is exactly what these “green” frauds are doing to us. But still insensitive.

      • It was funny to me. I’m tired of being expected to apologize for not meeting someone else’s standards, especially for something clearly intended as humor.
        Hope I’m not being insensitive… ☺

      • To the sensitive politically-correct folks just “triggered”, just consider that “black humor” and let it go. As for the rest of us socially well-adjusted folks – HAHAHAHAHAHAHAH! Good one, barnhart!

  5. The polls in Australia are telling us that the looney left have a 10 point lead and their policy is more of this rubbish. We have handed the keys of the asylum to the inmates. We are living in the age of unprecedented stupid and its worse than we thought.

    • Do you trust those polls? I though the previous election results down there came as a surprise. And in the UK, Labour was said to be running neck-and-neck right up to the bitter (for Labour) end.

  6. Do we the punters also gain? If our power generators can supply us without having to pay a high price for carbon credits, then part of that gain could trickle down to the end users. Probably wishful thinking.

    • I doubt the current free for all is entirely stable – if governments persist with trying to implement carbon trading schemes, I suspect the gangsters who are printing the fraudulent carbon credits will fight for dominance. Eventually consolidated criminal cartels will emerge, and the prices will skyrocket.

  7. So, if it is less than the market price of ‘carbon credits’ * to manufacture and then destroy some GHG then this is better than any pyramid scheme hitherto known to man.
    Is Bernie Madoff out of prison already?
    * Surely the most oxymoronic concept ever thought up. Its almost Shakespearean in in perfectly distilled use of language.

  8. I always understood that a ‘market’ consisted of a negotiation between, on one hand, a willing buyer for a product or service for which they have a need, and are prepared to pay a price commensurate with their perceived value for such a product, and on the other hand, a willing vendor of a product or service that meets the purchaser’s needs, at a sale price that gives them an acceptable profit.
    Additionally, to constitute a ‘market’, there needs to be competition between a number of buyers to procure required products, and also competition between a number of vendors to win sales with product features and/or keen pricing.
    In what ways does a contrived emissions trading scheme constitute a “market”?

    • We have two Quebecer’s vying to channel CO2 political pork cap’n trade money into Quebec. Mulcair and Trudeau will stick it to “The Rest of Canada” to funnel money into their home province.
      And the R.O.C. seem blissfully unaware, Quebec BTW is powered 95% by hydro (very little CO2) so they hope everyone else will have to buy from them.

      • Yes that is Quebec’s hope, but as I say in my post, California estimates that Quebec will be a net buyer not seller of carbon credits. So the revenue will flow to the Golden State in that case.
        But the real point is citizens of both jurisdictions will be shaken down by price increases across the board.

  9. The idea that CO2 levels have a detrimental effect on the World’s Climate is a fraud, so the fact that the Carbon (Dioxide) Credit Market is run as a fraud, and attracts frauds, should come as no surprise, to anyone. Both sides of this idiotic battle are nicely balanced.

  10. The only people who are disadvantaged by carbon fraud, are investors who tried to follow the rules, to produce “genuine” carbon credits, and politicians and activists who naively expected the carbon market to deliver emissions reductions.

    Not true. The companies who are forced to buy carbon credits will pass the cost on to their customers, who will find the prince of nearly everything goes up a little bit. It’s an extremely broad-based, almost invisible tax. Other companies who make changes to avoid purchasing carbon credits are by definition incurring some new or additional cost(s) for the sole reason of avoiding a greater cost purchasing carbon credits. Their customers will likewise pay a little bit more to cover those additional costs.
    At some margin, the mandated additional costs will move a company from profitable to not profitable, putting both the owners and employees at risk.
    Lots of people are impacted by mandated schemes to reduce CO2 emissions, which is what enables carbon credit fraud in the first place.

    • Alan, yes, that’s correct for the market’s existence as a whole, but these effects are lessened by fraudulent credits flooding the market and reducing prices. therefore, there is strong incentive to falsify carbon credits from all directions. It’s the classic kickback problem. When both parties in a deal benefit from fraud, then fraud will perpetuate nonstop.

    • Yes, I came here to post that exact same thing.
      The forced purchase of bogus certificates for the purpose of changing the weather a hundred years hence significantly inflates the cost of energy for anyone living under its yoke.
      It doesn’t just put companies at risk, it puts people at risk, when the ongoing life of that person requires access to affordable energy.
      The money has to come from somewhere, and it comes from people paying more for energy.
      It used to be spelt out plainly that the cost of electricity must ‘necessarily skyrocket’ to stop us plebs from using so much of it and despoiling the planet. The means to increasing that cost was to force the producers of energy to purchase these credits, thus passing the cost of ‘abatement’ (lol) directly to consumers of energy.
      Since the necessary skyrocketing of electricity prices has become a political hot potato in many locations, the same people are trying to obfuscate and distance ‘climate change policies’ from the rises in electricity and energy cost, despite the clear and obvious links.
      In AUstralia, when the last odious government pushed the worlds largest carbon tax on the populace, they circulated information which insisted that the doubling of electricity prices in ten years was due to ‘poles and wires’ – and the PM told everyone that the electricity transmission companies had been ‘gold plating’ the distribution network.
      What was not said in all that political obfuscation was that the cost of paying the renewable energy certificates was included in the ‘poles and wires’ category, and that much of the increase in transmission costs was due to having to run lines out to far-flung wind sites.
      Increasing the cost of energy was the direct and explicit motive for the climate-change crowd. Carbon Certificates was their primary means, because they thought they could snow-job people leery of government intervention with talk of ‘free markets in certificates’. That failed and the link is being buried down the memory hole. So it’s an injustice that a post like this doesn’t call that explicitly out – that the main losers in the carbon credits fraud is the end-purchasers of energy.

  11. Try slapping Putin with fines over this one the way the EU goes after corporate participants in price fixing or monopolistic behavior.

  12. Man, with everyone using the F-word in their posts, the moderators must be working overtime on this thread. I’d just like to give a shout-out to the guys working to keep our favorite message board clean.

  13. “What’s in it for you
    Turn Marginal Assets into Profit Generators
    Carbon farming is usually best suited to turn less profitable farming assets into profit generating assets allowing the best land to keep in production and reducing farm debt.”
    http://countrycarbon.com.au/?gclid=CN-EttS7xMcCFUgJvAodSIICVQ
    “Our services
    Carbon Carbon are carbon credit stock agents developing projects and working to deliver carbon farming income to landholders and the Australian agribusiness sector.”
    That’s ‘Country Carbon’ to you folks but we’re all a bit too rushed around here turning less profitable assets into more profitable assets to be too bothered with getting the website editing in order and besides those pesky Russkis have got the jump on us.

  14. I pay the Canadian Olympic team for exercise credits, but I haven’t lost any weight.
    Why is that?

  15. Highly interesting ! Thanks a lot ! Plus there are lots and lots more to be told/revealed on this topic…
    The Swedish blogg “Klimatupplysningen” (~ ‘Climate Enlightenment’ ) has today (Aug 25) a thread that gives you some more and detailed info about “SEI” and much more. Language is, of course, Swedish, but I think interested people (the thread is highly readable/interesting !) can easily translate the core text via Google translate. Some of the text is also in English. Link is:
    http://www.klimatupplysningen.se/2015/08/25/resan-till-paris-del-1-den-stora-omstallningen/
    Brgds from Sweden
    //TJ

  16. Eric, I can vouch for your theory. In the early 2000s, I was a technical consultant to greenhouse gas aggregator firms from Europe and Canada seeking to generate GHG credits under the Kyoto Protocol “Clean Development Mechanism.” I did projects in Latin America and Asia, focused upon agriculture (making methane out of cow and pig poop).
    It was great consulting work, but also very frustrating, as I learned that the business-people in these firms were technical idiots who hoped to game the system for their own financial advantages. What comes around goes around, all of these idiots were slaughtered when the market for Certified Emission Reduction credits dropped like a hammer.
    One of my sponsors lost over $1 billion US in paper value when the end of the game came!! As Anthony might say….”Shaka, when the walls fell!”

  17. I wonder if Lew et al get emails from Russian widows or Kremlin employees who need to get n million carbon credits out of the country? Might be worth a punt.

  18. “The vast majority of carbon credits generated by Russia and Ukraine did not represent cuts in emissions, according to a new study.”
    They needed a study to work that out?
    Seriously?
    Strewth!

  19. “or restricting gas emissions from petroleum production.”
    If the petroleum production is going to happen anyway, then any effort to restrict gas emissions from it should be considered a plus.

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