Measuring Emissions Against an Alternative Future : Fundamental Flaws in the Structure of the Kyoto Protocol’s Clean Development Mechanism

Proposals for reforming the Clean Development Mechanism (CDM) range in scope, from making the CDM’s rules stricter and/or more objective, to a more fundamental shift away from project-based offsetting. Interviews conducted in India during 2004-2009 on how the CDM is working in practice in India’s electricity sector, an analysis of the project documents from 70 registered CDM projects in India and China, and analysis of the UNEP Risoe CDM project database together indicate fundamental limitations to improving the outcomes of the CDM within its basic structure as a project-base offsetting mechanism. I find: (1) The majority of CDM projects are “non-additional” (would have gone ahead regardless of support from the CDM) and therefore do not represent real emissions reductions; (2) Due to the subjectivity inherent in project development decisions, a reasonably accurate filter for non-additional projects is infeasible; (3) The need to test project additionality, which is inherently difficult and inaccurate, adds uncertainty and time to the CDM application process, compromising its effectiveness in supporting truly additional projects; (4) Beyond the problems with additionality testing, the fundamental structure of the CDM leads to the over-generation of credits and limits its ability to reduce emissions; (5) Taking a step back, the large-scale use of carbon credits generated in developing countries by industrialized countries to meet their emissions targets hinders global efforts to mitigate climate change over the next decades. Both the large-scale use of offsetting to meet industrialized country targets and the continuation of project-based offsetting risk undermining the ability of global climate change agreements to control greenhouse gas emissions