The Kyoto Surprise Revisited

December 18, 2009

In the final hours of the Kyoto Protocol talks in 1997, when negotiators were as tired and grumpy as they are sure to be tonight and tomorrow, the parties struck a compromise for financing emissions reductions called the Clean Development Mechanism (CDM).

The CDM was called the “Kyoto Surprise,” and most of my week here in Copenhagen has been spent tromping through the snow to track down NGOs and interview partners who are debating how the surprise will weather its adolescence in the new climate architecture.

The CDM provides opportunities for industrialized countries with emission-reduction commitments to finance and implement emission-reducing projects in developing countries. Such projects earn saleable Certified Emission Reduction (CER) credits, which industrialized countries can count towards meeting their Kyoto targets.

The nitty gritty of the system is a labyrinthine bore, but the social effects on communities where these projects take place are crucially important. This was the focus of my research this summer in India, where communities of wastepickers and informal recyclers, some of the poorest citizens in the country, have been thrown into competition for garbage with CDM-funded waste-to-energy incinerator projects. It was excellent for me to see that the wastepickers held an official side event here during the first week of the negotiations. Watch the webcast of the event from the UN site.

Here’s the rub: the basic requirement of any CDM project is that it provides cost-effective emissions reductions and sustainable development benefits. Kyoto never defines sustainable development, but it is commonly understood to involve environmental, social, and economic dimensions. The CDM executive board must sign off on all emissions reductions, but it is host country governments, not the executive board, who determine whether or not a project contributes to sustainable development.

I’m beginning to realize that one of the most beguiling aspects of CDM reform is to find ways to develop and implement criteria, best practices, and oversight for the social dimensions of these projects, so that the environmental and economic aspects (the “cost-effective emissions reductions”) don’t fall victim to their own success.

One of the few places I’ve seen this happening is in the voluntary carbon markets. Tonight I attended a discussion with some voluntary carbon standard organizations such as Gold Standard and Social Carbon (after which I saw Al Gore marching through the hotel with a gaggle of hangers-on). These organizations are ahead of the UN on this one, perhaps because they are owned by NGOs.  When I ask how the sustainability matrices they’ve developed for their carbon credit verification systems might be mainstreamed into the CDM project approval process at the country level, I’m met with sympathetic shoulder shrugs and business cards.

This all assumes, of course, that reform is preferable to just chucking the CDM into the North Sea. Last night, a slightly drunk Scotsman leaned over his Grolsch to remind me that since the CDM was developed to bring incremental financing for technology upgrades and to get new projects over barriers in existing frameworks, it is by definition not going to lead to the kind of innovative thinking and bold action needed to shift our economies onto cleaner paths and achieve deep and lasting cuts in emissions.

Depending on who I’m speaking with, the CDM has either been a success because it has channeled billions of dollars to clean development in poor countries, or an exploitative failure because of its capricious and secretive executive board, geographical inequality, dubious emissions reductions and questionable contributions to sustainable development. CDM reform seems to be a given, but the draft texts that came out of the working groups yesterday showed only incremental improvements and planted a few new landmines.

One positive development in recent days is that there seems to have been a new category created, identifying developing countries that have less than 10 CDM projects. The number 10 is rather arbitrary, but in an effort at more equitable distribution (the vast majority are currently hosted by China and India), the text gives a boost to countries with few projects by 1) simplifying the methodologies and approval processes for small projects that are more likely to occur in these countries; 2) offering to delay the registration fees by granting loans that are later repaid from the carbon credit revenue; and 3) mandating that 10% of the credits purchased by industrialized countries must come from the under-10- club of developing countries.

Unfortunately, the texts are also considering whether or not to include carbon capture and storage (CCS) projects and nuclear energy projects in the CDM. Both are pretty terrible ideas. In a CCS project, carbon is captured at a power plant, liquefied, and then injected deep underground into geological formations. (Ironically, the best spots are depleted oil fields). The technology is lauded in wealthy countries, but few demonstration projects have been undertaken because of the prohibitive cost and fears about the safety and permanence of geological storage. Would an earthquake belch it back up? So if CCS is included in the CDM in the new agreement, it would provide a way to test the technology in low cost settings, but it would essentially make poor countries the guinea pigs for CCS demonstration projects. Duh.  Ditto with nuclear.

In my estimation, neither of these project types are going to make it through the weekend, but pressure on the CDM executive board for their inclusion will certainly continue down the line. Yet if they are explicitly shot down, it would be a victory for the NGO and activist community who has been pushing for a CDM Blacklist for some time.  In addition to CCS and nuclear, they’d like to see large hydropower, coal, and waste incineration on that list.

The Kyoto Surprise is growing up, and so the fight begins about how to discipline this unruly kid.