Enforcing Environmental Integrity : Emissions Auditing and the Extended Arm of the Clean Development Mechanism

The Clean Development Mechanism ("CDM") awards tradable credits to emission reduction projects in developing countries. Under the Kyoto Protocol, developed countries can use these credits to offset their own emissions. To ensure the environmental integrity of these offsets, the CDM has accredited a group of private auditors, called Designated Operational Entities ("DOEs"), to validate and verify the emission reduction claims of CDM project developers. This Article examines how DOEs have implemented their auditing mandate and the factors that have challenged this implementation. More specifically, through the analysis of over 1,000 DOE reports and over 25 interviews with key CDM participants, the Article investigates: the rules and standards guiding DOE authority; the competence and capacity of DOEs to perform their auditing duties; and threats to DOE impartiality and independence. In doing so, the Article highlights the incentives and governance structures necessary for privatizing the quality control mechanism of an emission offset system. It also evaluates the sometimes competing incentives that face the auditors of emissions offset projects and proposes reforms for the future operation of the CDM