June 2, 2007

Carbon Credits Lead To Increased Greenhouse-Gas Emissions

Do you like your irony so thick that it drips? The Guardian has a nice, juicy slice of it for you today. The main organization used by Europe to trade carbon credits has mismanaged the process so badly that they have created an increase in greenhouse-gas emissions as a result:

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incompetence, rule-breaking and possible fraud by companies in the developing world, according to UN paperwork, an unpublished expert report and alarming feedback from projects on the ground.

Possible fraud in the developing world? Who'd have ever thought that might happen? It gets better:

One senior figure suggested there may be faults with up to 20% of the carbon credits - known as certified emissions reductions - already sold. Since these are used by European governments and corporations to justify increases in emissions, the effect is that in some cases malpractice at the CDM has added to the net amount of greenhouse gas in the atmosphere. ...

There are only 17 of these validating and 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 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 suspending its right to work.

The entire system rests on a couple of major assumptions. The first and most laughable is that the system of carbon trades can be reliable based on spot audits. Billions of dollars are at stake in this enterprise. Without constant monitoring and checking, firms will cheat all day long -- especially since the metering of greenhouse-gas emissions relies on estimates more than precise measurements.

The second is that one can improve the environment by trading carbon credits. All that does is penalize the efficient and enable the inefficient. For instance, in this situation, companies that invested in efficiencies expected to recoup that investment by selling their carbon credits. If others cheat the system, the reliability of those credits gets damaged, and they will find that the credits are worth considerably less than they imagined. On the other hand, purchasers of credits will find it less expensive in that market to continue to emit the gases and pay less for the cut-rate credits. Eventually, no one will seriously consider investing in technology that actually reduces emissions.

If environmental improvement is desired, one has to move away from systems that support a status quo, which is what the credit market does, even when it works correctly. That means technological innovation and a realistic expectation of time and investment.


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» The Carbon Credit Hoax? from Fly At Night
Just like the immigration bill, this fast moving idea appears to be grossly flawed. What is the outcome if polluters can by all available credits to offset their emissions and, in the end, there are no credits remaining? Sounds like a push to me. ... [Read More]

Comments (10)

Posted by Duke DeLand | June 2, 2007 9:15 AM

The entire process of attempting to control others consumption/emissions/etc. is a joke...and the joke is on those of us who want to believe.

The levels of such lies and distortions flow from major groups...such as the EU...right on down to areas like my own Tampa where our local TV/Newspaper group today unveiled a water-consumption report for our local pols who have yelled, screamed, and carried on loudly about water consumption in the face of our drought.

The county water consumption average for each residence is 110,000 gallons monthly.

ONLY 2 of 9 they surveyed were below that and the top users were at figures above 350,000 gallons, three times the average.

As Orwell once wrote "we're all equal, some of us are just more equal than others."

Posted by Bill C | June 2, 2007 9:55 AM

The sad part of this (for the true believers in carbon offsets) is the lack of a broad vision, and economic analysis.

So much has been written about the deforestration of the Amazon, etc, etc, that continues today -- so the people who replant trees where their countrymen (and possibly even their related companies) cut them get money for doing so?

So you can buy a fig leaf, but it doesn't do any good other than make you feel good and make efficiency improvements more expensive.

Posted by Gerry | June 2, 2007 12:44 PM

Is there a Carbon Credit Inflation Index somewhere? I mean, Al Gore must be weeping now.

Posted by pilsener | June 2, 2007 12:48 PM

Carbon credits/carbon offsets should be a joke. But it's not because almost the entire world news media, the world left, the greens, most of Hollywood, and far too many politicans BELIEVE - I mean truly believe - in it.

When the comparison to religious indulgences is brought up to the true believers, the concept is dismissed. How dare one compare the ugly Christian religion to the purity of the cause to end global warming and save the planet.

It is of little importance that a few hustlers have contaminated the carbon offset market. The cause of fighting global warming is just and true and MUST prevail. All hail Mother Gaia!

Posted by Ironman | June 2, 2007 1:17 PM

There's been a lot of debate going on in the econ blogosphere (the leading arguments are summarized here by Mark Thoma) regarding how policy should be set to reduce "carbon" emissions. Essentially, there are only two proposals that would reduce carbon emissions: a carbon tax and a cap-and-trade market system.

From my perspective, even though a properly designed and implemented cap-and-trade market would have the flaws you note, it would however be better than the carbon tax proposals being floated around (assuming other taxes are not reduced dollar for dollar with the implementation of a carbon tax). The problem with a carbon tax is that it's a "one-size-clubs-all" solution set by group (government) that really has no interest in what works as long as it fills the coffers.

Need evidence of that? As cars and trucks have become more fuel efficient (a good thing, right?), the amount of gas being used is less than it might have been, which according to the AP, means that the gas (let's call them carbon) taxes we have now need to go up to pay for roads and bridges, as the government won't be able to take in as much as it needs to support the transportation infrastructure because people are using less gas and therefore, generating less tax revenue.

So what will happen if carbon taxes work as planned and people use even less? Higher taxes! And the whole cycle begins again!

Frankly, neither option is all that appealing and I wonder if there isn't a better, third option nobody is talking about as yet.

Posted by unclesmrgol | June 2, 2007 2:49 PM

Where there is lots of money to be made, crooked dealings will abound. Wonder how Albert Gore's carbon credits company stacks up against this competition?

Posted by johnCV | June 2, 2007 2:51 PM

Reminds me of corrupt priests selling Indulgences to the sinners.

That analogy works on a lot of levels.

Posted by bruce | June 3, 2007 3:58 PM

what! i have plenty of carbon credits.send me $5.00i send you a credit so i can buy more gas.

Posted by bruce | June 3, 2007 4:06 PM

what! i have plenty of carbon credits.send me $5.00i send you a credit so i can buy more gas.

Posted by Zumkopf | June 3, 2007 8:57 PM

At the risk of actually taking this seriously, who set these folks up as the global tax collectors? Who says the "carbon credits" are theirs to sell?

Bruce has the right idea. I'll sell them all my carbon credits, for, oh, 9000 euros. And then drive home in my big bore V12. Nitwits.