The Trouble with Cap and Trade

Climate finance was considered one of the few small victories at Copenhagen, where developed countries made hefty commitments to assist developing countries in climate change adaptation and development of alternate technologies to reduce emissions. The question is whether these programs, which will largely be funded by the private sector and the carbon trade market, will have any affect on reducing greenhouse gas emissions (GHGs).

The World Bank has already positioned itself at the center of the global carbon trade market with programs like the Clean Development Mechanism (CDM). This program allows industry in the developed world to “offset” carbon emissions by investing in projects that reduce pollution in other parts of the world. The topic has become so significant that the World Bank dedicated its 2010 World Development Report specifically to the issue of climate finance.

However, experts remain skeptical about the functionality of offsets, especially on an international level. While many reductions schemes look good on paper, it is easy for real emissions cuts to fall through the cracks during implementation.

Currently, the German NGO CDM Watch monitors the affects of many World Bank projects on local communities, ecosystems, and the environment as a whole. They give a thorough outline of the many failings of the current system:

Take for example large hydro power projects, which accounted for more than a third of CDM investemnt in 2008. Two such projects in China’s Hunan province we approved for $2 million of CDM credits last year. Construction of these massive dams forced 7,500 people out of their homes without adequate compensation. There is also doubt as to whether the project required CDM funds to be completed. If not, concept of a ‘carbon offset’ is nullified, and global greenhouse gas levels are not being reduced.

The key to success of any cap-and-trade scheme is a well-funded watchdog group to ensure that emissions cuts are truly being carried out. However, with the World Bank at the reins, it is likely that the institution’s chronic lack of transparency and accountability will continue to plague the carbon trade system.

By Mary Tharin

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1 Comment

Filed under Environment

One response to “The Trouble with Cap and Trade

  1. Valuable information and excellent design you got here! I would like to thank you for sharing your thoughts and time into the stuff you post!! Thumbs up. Regards, West – Center Caps

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