African climate CDMs ‘Can’t Deliver the Money’
Patrick Bond and Michael Dorsey
Africa is being cooked by climate change, and those causing the crisis should compensate the victims. This is probably the only hope for any top-down action at the Durban COP17 this week, with the Green Climate Fund design committee co-chaired by Trevor Manuel now searching for the US$100 billion promised by US Secretary of State Hillary Clinton in Copenhagen two years ago.
One dangerously dysfunctional vehicle for delivering money to Africa is the Clean Development Mechanism, the CDM, which was included in the Kyoto Protocol as a way for Third World projects to get resources. But it isn’t delivering the goods, for a variety of reasons that mean Durban should host a rethink.
The aim is to facilitate innovative carbon-mitigation and alternative development projects by drawing in funds from northern greenhouse gas emitters in exchange for their continued pollution. It is the use of ‘market solutions to market problems’ so as to lower the business costs of transitioning to a post-carbon world. After a cap is placed on total emissions, the idea is that high-polluting corporations and governments can buy ever more costly carbon permits from those which don’t need so many, or from those willing to part with the permits for a higher price than the profits they make in production or energy-generating or transport activities.
With Europe as the base, world emissions trade grew to around US$140 billion in 2008 and although markets then went flat due to economic meltdown, increasing corruption investigations and Copenhagen-induced despondency, the trade in air pollution was at one point projected to expand to US$3 trillion/year by 2020 if the US were to sign on. The US$3 trillion estimate didn’t even include the danger of a bubbling derivatives market, which might have boosted the figure by a factor of five or more.
In November 2010, a new estimate of up to US$50 billion/year by 2020 in North-South market-related transfers and offsets emerged from a United Nations High-Level Advisory Group on Financing for climate mitigation and adaption, including Manuel. World climate managers evidently hope to skimp on grants and instead beg business to push vast monies into CDMs instead.
Durban is an important guinea pig, for at South Africa’s lead CDM pilot, the Bisasar Road landfill, methane from rotting rubbish is converted to electricity. After helping set it up, the World Bank refused in August 2005 to take part in marketing or purchasing Bisasar Road emissions credits. Local activists say the reason was growing awareness of Durban’s notorious environmental racism.
In March 2005, just as the Kyoto Protocol came into force, a Washington Post front-page story revealed how community organiser Sajida Khan suffered cancer from Bisasar Road’s toxic legacy. Back in 1980, the landfill – Africa’s largest – was plopped in the middle of Durban’s Clare Estate suburb, across the road from Khan’s house, thanks to apartheid insensitivity. Instead of honouring African National Congress politicians’ promises to close the dump in 1994, the municipality kept it open when US$15 million in emissions financing was dangled.
After Khan died in mid-2007 after her second bout with cancer – which she believed was landfill-induced – Clare Estate civic pressure to close Bisasar subsided and Durban began raising €14/tonne for the project from private investors.
In 2009 the Financial Times reported, ‘The CDM inherits the UN’s suffocating bureaucracy, so smaller projects struggle to gain approval. But more important than what it keeps out is what it lets in. The criterion of “additionality” is supposed to rule out projects that would not be undertaken without CDM payments. Not only is this counterfactual approach utterly unverifiable; it is also an ideal target for gaming.’
Since then little has changed, as this week’s United Nations Executive Board meeting at Moses Mabhida Stadium will again witness bureaucratic impotence, cronyism, and a handful of powerful countries controlling nearly three-quarters of the credits produced. The CDM is neither reducing emissions nor securing its promised sustainable development.
The Executive Board suffers from inadequate governance. UN rules specify that ‘members, including alternate members, of the [Clean Development Mechanism’s] Executive Board shall have no pecuniary or financial interest in any aspect of a CDM project activity or any designated operational entity.’
Despite this rule, CDM Board members often maintain multiple roles at the same time, many of which are lucrative. Board members serve as negotiators during UN climate talks. They represent their countries’ national authorities, or act as managers of large government CDM purchasing programs. Yet the NGO CDM Watch reports that ‘a conflict of interest is only noted in 4 out of 64 meeting reports of the Board.’
The inability to adequately to prevents conflicts is exacerbated by the CDM’s opaque decision-making. Again, UN rules mandate meetings of the Board ‘shall be open to attendance, as observers, by all Parties and by all UNFCCC accredited observers and stakeholders, except where otherwise decided by the Executive Board.’ However, due to a rising number of discussions on individual cases, large parts of the meetings of the Board take place behind closed doors. When interested third parties seek access to attempt to hold the CDM-EB accountable they are regularly denied access.
The CDM gives primacy to its ties to large corporations while often overlooking and even ignoring its foundational institutional mandate to sustainable development on behalf of Africa. The US based, Global Justice Ecology Project describes the CDM as the ‘Corporate Development Mechanism’ and the ‘Corrupt Development Machine.’
The CDM socialises the harms of unfolding climate change – by failing to move funds to those harmed first and most, like communities across Africa; and it privatises benefits for increasingly small cadres. The top four beneficiary countries – China, India, Brazil and Mexico – received three quarters of CDM project support, with China alone generating more than half.
The only real winners in emissions markets are speculators, financiers, consultants (including some in the NGO scene) and energy sector hucksters who make billions of dollars in profits on the sale of notional emissions reduction credits. As the air itself became privatised and commodified, poor communities across the world suffer, and resources and energy are diverted away from real solutions.
Last month at Durban’s UN CDM meeting, a barrage of reports critical of the UN’s CDM strategy were released by academics (including ourselves) and NGOs, and the credibility that carbon trading needs to gain traction going into the COP has been eroded. This is good, because only by leapfrogging market ‘solutions’ that depend upon chaotic, unfair financial markets will we get to the genuine solutions so desperately needed to solve the climate crisis.
Dorsey and Bond are professors at Dartmouth College and the University of KwaZulu-Natal, respectively.