• Bruce Rich
  • Environmental Forum
  • May-June 2011
  • p. 20

Established under the Kyoto Protocol, the Clean Development Mechanism (CDM) is based on the premise that a ton of greenhouse gas reductions can be purchased more cheaply in a developing country than a rich country.... In February (2011) the U.S Government Accountability Office released a report...that identifies possibly unresolvable problems inherent not just to the CDM but to carbon offsets in general.... CDM transactions take place in developing economies where state intervention in, and manipulation of, energy investment and markets, not to speak of corruption, is rife; determining whether a particular wind farm or hydro plant would or would not have been built but for the CDM subsidy, and whether it would somehow displace a GHG(greenhouse gas)-intensive investment that otherwise would occur, is an exercise in futility—and an invitation to fraud....The report points out that every major financial stakeholder — sellers and buyers of carbon offsets as well as the verification companies — has a perverse incentive to undervalue project quality (i.e., real GHG reductions). Market incentives are working here, but not in the way CDM proponents intended.

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