Vancouver, Canada (GLOBE-Net) – This week the The Kyoto Protocol’s clean development mechanism (CDM) has registered its 1000th project, an energy efficiency project in Andhra Pradesh, India, expected to reduce carbon dioxide emissions by more than 34,000 tonnes annually. While many are celebrating the start up success of multibillion-dollar CDM experiment designed to curb global warming, CDM regulators themselves are tightening up acceptance criteria for the program to screen out questionable projects that may not be delivering real environmental benefits.

Under the CDM, greenhouse gas emission reduction projects in developing countries can earn saleable emission offset credits, called certified emission reductions (CERs), each equivalent to one tonne of carbon dioxide. CDM projects have so far generated more than 135 million certified emission reductions credits.

According to Rajesh Kumar Sethi, Chair of the CDM Executive Board, the mechanism is anticipated to generate more than 2.7 billion CERs in the first commitment period of the Kyoto Protocol (2008-2012).

But while the number of CERs issue is rising, U.N. regulators are concerned that some independent auditors who are responsible for vetting the environmental legitimacy of these projects, have been letting developers push through ventures of questionable environmental value.

Several dozen developing-world projects, ranging from hydroelectric plants to wind farms, have been rejected in recent months because it was doubtful they would produce a real environmental payoff. Others have been turned down because they failed the UN test of “additionality”, i.e. they would have gone ahead anyway and were not really dependent upon revenue from the sale of carbon credits to make them viable, in which case the money would have been wasted.

At issue here is whether the whole concept of using market-based incentive to tackle greenhouse-gas emissions will be truly successful. Some have argued that the CDM mechanism provides a convenient way for companies to be seen to be environmentally responsible by giving them a cheaper alternative to cutting their own emissions. They can buy rights to pollute, i.e. "carbon credits," which essentially allows them to continue to spew out carbon dioxide.

The sale of the carbon credits, usually brokered by middlemen who bring potential projects to the attention of credit-seeking companies, was intended to fund emission-reducing projects in China and other developing countries that otherwise would be too costly to build.

The market for these credits has exploded on a worldwide basis, reaching a value of 40.4 billion euros, according to Point Carbon, a Norway-based industry consultant. Western companies and governments invested six billion euros last year in credits from projects in the developing world, nearly double that of a year earlier, Point Carbon says. (See graph).


While the UN Regulators are responding to recent criticism that the CDM scheme is plagued with incompetence and fraud by tightening up on their evaluations, others argue that the problem is much more profound. If the CDM were to be discredited entirely, polluters could no longer buy carbon credits and would each have to cut their own emissions which, according to most analysts, would cause significant rises in the price of goods to consumers.

That is one of the key reasons why trust must be maintained about the integrity of the carbon market, and that projects to be funded in part through the sale of carbon credits must be environmentally viable.