Three years after writing the above, it seems a number of those concerns are becoming reality. CSE, in their publication Down To Earth, reports how a few major companies in India are implementing CDM projects, and using advice from some of the world’s largest consultancy companies, such as Ernest & Young, and PricewaterhouseCoopers.

However, the way in which these projects have been designed, set up, and run is highlighting many problems in the CDM implementation. Summarizing from Down To Earth:

• Private companies have dominated the field in a way that has reduced public participation. For example:
  • Private companies have hired private consultancy firms to create the projects and deals;
  • There is a lot of secrecy in how much the company sells its earned carbon credits;
  • There is very little public accountability, verification, and transparency. “An imperative to mitigate climate change using the market as an instrument, has reduced itself to using the worst tools of an unfair market. For instance, it thrives on non-transparency so that future sellers do not know the price of CERs and are forced to sell cheaply in the face of competition.” (Emphasis added)
  • Investigations from Down To Earth revealed that some of these big name consultancy companies had copied text from one project document to another, spelling mistakes and all, and was done in such a way as to suggest that some tasks had not actually been done even though it was reported as so;
• Commoditization, as feared, is occurring. As was noted in a side note that accompanied the main article:

  Within the European Union, carbon is traded at US $26.7 per tonne of carbon dioxide equivalent. However, outside Europe CERs are being traded for a pittance. The only advertised price is by the World Bank, which pays about US$ 5. Other deals are being made in the range of US $5-10. It isn’t clear why this price difference exists.… CER are sold in deals where prices are not revealed, so a fair price is difficult to arrive at. “This is the old commodities problem again,” says Mukul Sanwal, special advisor, UNFCCC, referring to the situation where commodities like coffee are sold at subsistence levels in developing countries, yet earn huge windfalls for companies in the developed world. Clearly, non-transparency makes for an unfair market in the interest of the rich buyer.

  — Ritu Gupta, Shams Kazi and Julian Cheatle, Acting pricey; Why is a tonne of tradable carbon worth US $5 in India and US $27 in Europe?, A side note to the main article, Newest Biggest Deal, Down To Earth Magazine, November 15, 2005 Issue

• Promises of sustainable development, helping local communities, and consulting with them has not happened.
  • In some cases, local communities have been promised jobs from new factories and chemical cleanup plants being opened up as part of the CDM initiative, but in the end those jobs are never given to them;
  • In other cases, those plants end up damaging nearby ecosystems, pollute waters, destroy forests, or damage crops in nearby fields;
  • Locals are not seeing this as a “clean” development mechanism;

More generally, CSE charges that the whole process has become “convoluted” to ensure that

each project is additional, so that only that project which would not have happened without CDM can qualify. This simply means whatever a government does to mitigate climate change — as a matter of policy — cannot qualify as CDM work. For instance, if the Indian government specifies tough emission norms for buses, the public transport sector does not get credits under CDM. The argument is: isn’t that something they were mandated to do? If a country has standards for tighter emissions on all electric appliances, resulting in huge efficiency gains and lesser emissions, it cannot apply for CDM. These projects will not be seen as additional, but “business as usual”. The current design provides countries with perverse incentives to keep polluting as long as they have the money to pick up carbon credits. In this respect, is not CDM actually against sustainable development?

In all this, the basic criterion — CDM must “assist” developing countries for sustainable development — has got lost. Poor countries, with financially-strapped governments, are forced into a mindless competition to facilitate the selling of credits, cheaply and as fast as possible. Woe betide a government if it interferes or makes regulations. The drive for “cheap” reduction is reflected in the kind of projects currently registered or under validation. Wind energy projects constitute 7 per cent of all projects; they bring less than 3 per cent of cers being considered for sale. There are no afforestation projects on the anvil. No high-end energy efficiency projects, no urban public transportation projects.

— Ritu Gupta, Shams Kazi and Julian Cheatle, Newest Biggest Deal, Down To Earth, November 15 2005 Issue

The Clean Development Mechanism is thus far, Down To Earth feels, a Cheap and Corrupt Development Mechanism.

The Bretton Woods Project also reports how UN documents showed “rule-breaking and possible fraud from CDM projects, faults with up to 20 per cent of the carbon credits already sold, and gross incompetence from three out of the 17 specialist companies that validate and verify the projects.” The Project also criticizes the World Bank, which plays a key role in the CDM process and has promoted it for Africa. Yet one of the Bank’s own report, the Project notes, has not helped Africa:

Africa accounted for just three per cent of certified emission reduction permit sales last year, with the majority going to China and India. The Bank recognized that the CDM lacks a facility through which developing countries with “obvious energy needs can be rewarded for clean development.” Most African countries’ emissions are too low for them to qualify to earn credits for carbon reductions.

— World Bank’s carbon trading plans fail Africa, Bretton Woods Project, July 2, 2007

The Project also notes an Oxfam study finds that the World Bank has grossly underestimated the cost of dealing with climate change for developing countries, because they mostly count macro factors, not more local factors and local costs. (The World Bank’s widely cited figure is between $10 and $40 billion dollars. Oxfam’s study says it is at least $50 billion.)

In another report by Down To Earth, CDMs are criticized for thriving on non-transparency, conflict of interests and is beyond regulation:

It is for this reason that the South offers huge business possibilities. The CDM market here has already been taken over by large companies, global consultants, traders and brokers. In this market, CDM has become a mere financial mechanism — not a measure to combat climate change. As a result, its outcome has been small and cheap. Small, because it has failed to move the world towards tangible solution for climate change like clean energy and public transport, and cheap because the focus is to provide cheapest possible CERS (certified emission reductions) to the developed world, and not make the transition to clean energy necessary.

— C is for unclean, Down To Earth Magazine, Centre for Science and Environment, December 15, 2007

The low-hanging fruit, the easy things are usually done by CDMs they argue:

There are two problems with this cheap reduction approach: one, it does little to move the world towards cleaner energy. In fact, it subsidizes the fossil fuel energy in the developing world.

Two, it takes away the cheap and easy options for emerging south countries and credits them into the carbon balance sheet of the industrialized world. This means that the South will be shortchanged when it has to take on legally binding commitments—it would have “sold” off by then its cheap options and would not have the money left to invest in the more high-end of transition options.

— C is for unclean, Down To Earth Magazine, Centre for Science and Environment, December 15, 2007

The previous link, as well as an earlier Down To Earth article quoted further above note that because CDM projects are only considered if they are “additional” to business-as-usual projects, many projects lack the funding they need. Inter Press Service reported an example of this when noting that, a hugely successful solar energy project in India that helps poor people get electricity has not seen any benefits from the CDM.