Priorities for the Board in 2011-2012 (Newsletter #12)

One of the most important agenda items at this week´s Board meeting is the CDM business and management plan that should lay out priorities for the years 2011-2012. The impact of the priorities that will be agreed here will be enormous because they will define the work of the Board over the next 2 years. The following article looks at serious deficiencies that must be addressed as part of the Board´s priorities: (1) Environmental integrity (2) DOE liability for excess issuance of CERs (3) Emergence of deficiencies in the procedure for requesting reviews, (4) How to deal with human rights abuses and (5) how effective means for public participation could look like.

a.    Environmental Integrity Must Rank Higher

So far, the business plan suggests the following five specific objectives to be achieved over the next two years:

(a)   Greater efficiency in the operation of the CDM

(b)   Geographic expansion of the CDM

(c)   Improved objectivity, clarity and integrity in the CDM

(d)   Enhanced transparency of the CDM

(e)   Enhanced promotion of the mechanism

CDM Watch is not happy with this order of priorities because the only potential place where flawed rules could be addressed, is as part of objective (c) where the business plan notes that “The Board shall strengthen the objectivity and clarity of requirements established for the CDM in a manner which ensures the environmental integrity of the CDM”.

In fact, CDM Watch doesn’t agree with the wording of this objective because environmental integrity should not be looked upon as a by-product of clarity and objectivity of the CDM. On the contrary, environmental integrity must be an overarching principle of the CDM that deserves to be a separate, high-ranking objective.

Within this context, it is important to note that the CDM Executive Board has so far neglected to act with regards to several methodologies where flaws have been detected. CDM Watch has alerted the CDM Executive Board about serious flaws in the methodology used for N2O from adipic acid abatement projects and the crediting of new coal power plants which result in the issuance of millions of credits that do not represent real emission reductions.

However, the UNFCCC Secretariat has refused to even consider our requests to address these serious flaws in the methodologies referred to on the grounds that they had been submitted by an NGO with no mandate to take this kind of initiative and in the absence of relevant decisions by the Board.

Even the Methodology Panel, the UN body that receives requests to revise methodologies in the first instance, has asked the Board to advise it on how to these requests and whether they can be officially accepted by the Board in order for the Meth Panel to respond on the basis of a scientific assessment. However, the Board continues to ignore this issue and has so far refrained from taking any action to investigate and address these issues.

In fact, at its last meeting in November 2010 in Cancun, several members bluntly stated that addressing environmental deficits in CDM methodologies should not be a priority of the Board.

Action to be taken by the Board:

The credibility of the CDM Executive Board, the CDM and the climate change regime as a whole is at stake. With scandals ranging from the theft of CERs to the gaming of CDM projects proliferating with every month that goes by, it is hard to believe that the CDM Executive Board has chosen not to place the environmental integrity of its mechanism at the top of its list of priorities. Quite rightly, the CDM reform is often criticised for putting financial security, streamlining and simplification at the top of that list. It is now up to the CDM Executive Board to reconsider what is required in order to put the CDM back on the right track. The following measures should be key priorities in 2011:

  • Make the improvement of environmental integrity a top priority for the years 2011-2012
  • Prioritize the revision of methodologies where environmental integrity issues are detected
    • Advise the Methodology Panel to give full formal consideration to the revision request regarding ACM0013 (supercritical coal power plants) that was submitted in September 2010.
    • Initiate revisions of two waste sector methodologies (ACM0001 and AM0025)
    • Initiate revision of AM0034 (Catalytic reduction of N2O inside the ammonia burner of nitric acid plants)
    • Initiate revision of AM0021 (Baseline Methodology for decomposition of N2O from existing adipic acid production plants)
    • Ensure independent validation of grid emission factors
    • Give full formal consideration to proposals submitted by admitted observer organizations to the Board for improvement of baseline and monitoring methodologies and methodological tools

b)   DOE Liability for excess Issuance of CERs

At the last CDM Board meeting in November 2010, the EB discussed a proposal to make CDM auditors which approve a project liable for excess carbon offsets issued to those projects. The EB did not make a final decision on the issue of liability but did make several important recommendations for reform that could help improve the quality of auditors’ work. The EB recommended a procedure that would automatically suspend DOEs from the market while mistakes are investigated and would cancel identified excess CERs within 30 days of the end of an investigation. Furthermore, DOE performance would be made publicly available in order to improve transparency and access to information on the performance of DOEs.

Action to be taken by the Board:

CDM Watch calls on the Board to put this issue that would ensure full transparency on the performance of DOEs back on the agenda and recommends adopting the draft procedures as proposed including financial sanctions for Designated Operational Entities (DOEs) in case of non-compliance with requirements by the CDM Executive Board. This would be an important step towards introducing appropriate incentives for improving the quality of submissions from DOEs.

c)   Emergence of  Deficiencies in new Procedure for Reviews

Several observers have highlighted that the number of CDM projects under scrutiny this week has dropped significantly compared to previous meetings. This week´s meeting will only look at seven projects. By contrast, more than 100 projects were examined at some EB meetings last year.

While it has been reported that the huge drop can be attributed to efforts to streamline registration processes and bring in external experts to deal with the backlog of projects, CDM Watch is of a different opinion.

It might be true that the procedures for review of requests for registration that was adopted at the 55th Board meeting in July 2010, has resulted in fewer projects being placed on the Board’s agenda. However, this fact does not in any way mean that the projects have become better or that DOE performance has improved.

On the contrary, the new procedure outsources a large chunk of project work to the Secretariat and the Review and Issuance Team (RIT). Projects are only put on the Board´s agenda if there are conflicting opinions between the Secretariat and the RIT. If no Board member intervenes, they are registered automatically.

The new procedure has seen a fast-track registration of a number of problematic projects despite of reviews that have been requested and a corresponding sharp increase in emails to CDM Watch from concerned citizens. Just to name two projects that were clearly non-additional and slipped through the Executive Board’s net:

  • Greenhouse  Gas  Emission Reductions Through Super-Critical Technology – Sasan Power Ltd.(3690)
    • Problem: The project is non-additional because the construction of this NEW coal power plant has been planned as part of the Indian government´s Ultra Mega Power Plan Programme (UMPP) that mandates all plants to use supercritical technology. At a time where the integrity of the CDM is being questioned for a wide range of reasons, the registration of this huge, heavily polluting, clearly non-additional coal-fired power plant as a CDM project (3rd largest project in the whole CDM pipeline after industrial gas projects) is a black day for the CDM.
    • DOE: TUEV NORD
    • Crediting period: 31 Dec 11 – 30 Dec 21
    • Non-additional annual emission reductions: 2,246,000
    • Total non-additional CERs expected: ~20 million CERs
  • Henan Yinge Industrial Investment Corporation Wastewater Treatment and Methane Recovery Project, registered on 7 February (4114)
    • Problem: The project is non-additional because the baseline situation and total investment presented by the project developer in the PDD contradicts what is shown in the local FSR approval which is also publicly available but has obviously not been checked by the DOE.
    • DOE: TUEV NORD
    • Crediting period: 7 February 2011- 6 February 2021
    • Non-additional annual emission reductions: 74,000
    • Total non-additional CERs expected: 740,000 CERs

Action to be taken by the Board:

Obviously, the procedures in place do not guarantee that clearly non-additional projects are not being registered. This process must be significantly enhanced and the scrutiny in assessing requests for registration and issuance strengthened. The new procedures open for the floodgates to projects such as Sasan, which is unacceptable. They do not even allow observers to track how and when the decisions that led to the registration of dubious projects were taken. At the very least, the opinion of the Secretariat and the Review and Issuance Team must be made public. If environmental integrity and transparency are to be taken seriously, the new procedures must include a remedy that allows for appeals against the unjust registration of project activities.

d)   Host Country Sovereignty versus Human Rights Abuses

Current CDM Rules rely on the CDM host country government to assess whether a project contributes to sustainable development. This places the assessment of sustainable development in the hands of governments that would like to see more investment in their respective countries. As a consequence it is quite logical that essential criteria to assess sustainable development, which are chosen by host country governments themselves, are already deemed to be fulfilled with the mere requirement that the projects “increase GDP per capita.” As a consequence, no CDM project has ever been rejected on the basis that it did not contribute to sustainable development.

Allegations of serious human rights abuses related to CDM project applications in Honduras and Panama  have caused an outcry amongst civil society organisations and widespread dismay that human rights are not being taken seriously under the CDM.

Action to be taken by the Board:

This issue clearly needs to be addressed at the next climate change conference in Durban (COP-17). However, in the meantime the CDM Executive Board must re-assess their mandate and find ways of preventing projects that are linked to any sort of violations of international laws from acquiring eligibility under the CDM. A stringent requirement for DOEs to check conformity with international human rights law when validating the project would be an option. Another more efficient option would be to link remedies to the monitoring periods of a given project. The detection of non-conformities, e.g. incidents that involve human rights violations should lead to the project being stripped of CDM eligibility or at the very least lead to the suspension of issuance. This would only be a logical move given that responsible investor would not be interested in buying carbon credits from projects that do not comply with minimum international standards.

Within this context, CDM Watch invites you to sign FIAN´s Online-Petition calling for stronger commitments to Human Rights with regards to climate protection.

e)   Effective Means for public Participation

One of the EB’s five identified priorities for 2011-2012 is “Enhanced transparency of the CDM”. The draft CDM business plan suggests that the Board shall supervise the mechanism in a transparent and participatory manner, ensure greater transparency regarding its work and its processing of submissions and enhance the governance structure of the mechanism.

The CDM offers a couple of opportunities for public participation in the CDM, including a new appeals procedure against DOEs which is also open to civil society and explained in more detail below.

Against this backdrop, one of CDM Watch´s own objectives for 2011 is to engage with a wide range of civil society actors in order to increase and coordinate public participation in the CDM. However, a significant number of obstacles within the CDM procedures seriously hinder any effective public participation in a manner consistent with the UNFCCC and Kyoto Protocol and general principles of international law.

In order to increase and maintain the legitimacy of the CDM and the Executive Board’s decisions as part of international climate change mitigation effort, improvements to public participation in the CDM are therefore essential and must be fleshed out in the 2011-2012 business plan.

Action to be taken by the Board:

Of particular importance in the short-term are the following procedural changes:

  • Set up an email notification system to alert civil society to opportunities to provide input
  • Increase public commenting period on PDDs during validation from 30 to 60 days
  • Ensure that all supporting documents are uploaded prior to the start of the public commenting period
  • Increase public commenting period on new methodologies from 15 to 45 days
  • Require translation of the PDD into the language(s) of the host country