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Governments must act to save the clean development mechanism (CDM), a UN panel has reported.
Under the CDM projects such as wind farms and the distribution of efficient cookers and lights, countries earn carbon credits for CO2 emissions avoided.
The scheme, created by the UN after Kyoto, has been undermined by the global recession and eurozone crisis so that the credits have fallen in value from $20 (£12.30, €15.50) a tonne in 2008 to $3 today. In addition, over-supply has devalued surplus credits to €1 ($1.30, £0.80) a tonne under another UN scheme permitting credit trading. As a result, many potential projects are not commercially viable and financiers and developers have shied away.
One anomaly reported by the New York Times is that 46% of CDM credits have come from 19 companies that have destroyed the industrial gas HFC-23, a by-product from the manufacture of refrigerator coolant gases, with a global warming potential 11,000 times greater than CO2. These companies were said to have increased their coolant gas production to profit from destroying HFC-23. In 2008, two academics calculated that in four years, these companies would spend $100m destroying HFC-23 to receive $4.7bn in CDM credits.
There were also press accusations that Indian officials routinely approved CDM proposals without investigating, and Soumitra Ghosh, of the North Eastern Society for Preservation of Nature & Wildlife, said: “Of the 60 CDM projects I have evaluated, there appeared not to be one that actually reduced emissions.”
UN panel vice-chair Joan MacNaughton asked governments to pledge to continue the system, toughen emission targets and perhaps buy credits themselves. However, even if countries introduced reforms, a new system could not function before 2020.
Among the optimists, Flora Yu, of the UK-based consultancy IDEAcarbon, said some countries – including Australia, China and South Korea – would want to link their cap-and-trade carbon markets to a global system.
Governments have a chance to salvage the system when they meet in December to draft a new climate change treaty.
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