UK study slams the use of the carbon clean development mechanism by fossil-fuel companies
The UN's clean development mechanism (CDM) is being undermined by the vested interests of the energy sector, which is using it to prop up existing investments in fossil fuels, according to a study funded by the UK government. The three-year study of CDM governance in India, South Africa and Argentina has made severe criticisms of the scheme, including that it is "skewed towards the interests of polluting corporations and people who earn a living from the CDM market rather than the communities that host the projects".
India's Tata and Reliance, as well as South Africa's Sasol, are among the major companies using the carbon market via the CDM to support core businesses based on fossil fuels, the study says.
Many of the CDM's biggest players, which are raising large amounts of finance through the sales of certified emission reductions (CERs), are businesses based on fossil fuels, the study's author Peter Newell said in an interview with ICIS Heren.
"If you look at Shell, they are powerful, a big energy player. Do they need incentives to get away from fossil fuels? People buying CERs would rather see [the CDM] supporting renewables," Newell said.
Shell is involved in 52 registered CDM projects, UN data shows. Tata is involved in 14 projects, Reliance in 10 and Sasol in one.
Last year, a coal-based methodology was suspended by the CDM board. But other methodologies remain within the CDM, which are directly linked to fossil-fuel production, such as gas-recovery projects at oil fields in Nigeria, Newell said.
A "revolving door" between jobs at designated national authorities (DNA), project developers and verifiers encourages collusion between DNAs and project developers, while DNA accountability is "often either weak or non-existent", the study also found. The CDM is run by a "tight-knit community of experts" and this raises questions about how decisions are made, Newell said.
The study, funded by the UK's Economic and Social Research Council, comes as the CDM is reviewed. The review panel will investigate the environmental integrity of the CDM but is unlikely to challenge CDM's basic premise of emissions offsetting (see EDCM 27 February 2012).
The study's conclusions have been presented to the former chair and now deputy chair of the CDM executive board, Martin Hession, and Newell has been interviewed by the European Commission on reform of the CDM.
Separately, Shell has said it expects the carbon dioxide (CO2) intensity of its production and its absolute emissions to grow in coming years, which will probably have an impact on its bottom line.
"Over time, we expect that a growing share of our CO2 emissions will be subject to regulation and carry a cost. If we are unable to find economically viable, as well as publicly acceptable, solutions that reduce our CO2 emissions for new and existing projects or products, we may incur additional costs in delayed projects or reduced production in certain projects," the company said in its annual report.
The company's increasing emissions will be partly caused by increased production from unconventional sources, such as oil sands in Canada, it said.
Shell has been subject to litigation related to climate change, it said, dismissing these cases as "without merit and not material to Shell". A spokesman said the cases were in the US but was unable to state who the counterparties were.
Shell, Tata, Reliance and Sasol were unavailable to comment on the study. VF
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