Two studies call for an overhaul of UNFCCC offsetting mechanisms in the Paris agreement

The new climate deal expected to be signed at COP21 in December is likely to change much of the global strategy to tackle climate change established by the Kyoto Protocol of 1992. Two reports recently issued by the Stockholm Environment Institute (SEI) and by Carbon Market Watch analyze the flaws in the flexibility mechanisms created under the UNFCCC and propose ways to overcome current inconsistencies in the upcoming climate agreement.

The study conducted by the Stockholm Environment Institute (SEI) evaluates the environmental integrity of Joint Implementation (JI) in the first commitment period of the Kyoto Protocol (2008-2012).

Along with the Clean Development Mechanism (CDM), JI is an offsetting mechanism created under the Kyoto Protocol to provide flexibility in ways countries can achieve their emission reductions goals. Under the JI system, a country with binding targets under the Kyoto Protocol (Annex B) can earn “carbon credits”, or offsets (named ERUs), by financing an emission reduction project in another Annex B country (the CDM system works similar to JI, with two main differences: CDM projects are hosted by developing countries with no legally binding commitments, listed as non-Annex 1 in the UNFCCC, and offsets issued under CDM are named CERs).

Analyses conducted by SEI fund that most of the ERUs offsets issued under JI mechanisms came from non-additional or over-credited projects and activities, related for instance to spontaneous combustion of coal waste piles and utilization of associated petroleum gas.

According to the study, the environmental integrity of this kind of JI offsets is very low and their use may have enabled global GHG emissions to be about 600 million tons of CO2e higher than they would have been if countries had met their emissions domestically.

“The implications for the European Union’s Emission Trading System are particularly serious”, the authors wrote in the policy brief. “As of April 2015, more than 560 million of ERUs had been used in the EU ETS. JI may therefore have undermined the EU ETS emission reduction target by about 400 million tCO2e”.

SEI study identified several other problems of JI mechanism, such as the lack of international oversight and the sometimes poor performance of Accredited Independent Entities (AIEs) in validating and verifying the compliance of the projects with JI requirements.

Although the JI criteria are currently under review, the problems analyzed in the study “would require far greater reforms than are now on the table”, the authors said. A new climate agreement should ensure environmental integrity in any international transfer of units, but this goal clashes with limitations due to the unclear ambition of INDCs, the lack of quantifiable, multi-year emission reduction targets, the absence of internationally agreed accounting rules and the information asymmetry between project developers and auditors or regulators.

“Given the reduced potential of crediting mechanisms in a world where most emissions may soon be covered under other mitigation policies, and given the general challenges of ensuring environmental integrity for crediting mechanisms, the role of crediting mechanisms beyond 2020 may be rather limited”, the authors concluded.

The second report, issued by Carbon Market Watch while negotiators were gathering in Bonn for the August round of UNFCCC interim negotiations, targets social and environmental accountability criteria and safeguards in different UNFCCC instruments including the Clean Development Mechanism (CDM), Reducing Emissions from Deforestation and Forest Degradation (REDD+), Nationally Appropriate Mitigation Actions (NAMAs), the Green Climate Fund (GCF) and the Adaptation Fund (AF).

The advocacy group found that the mandate expressed in the 2010 Cancun agreements (“Parties should, in all climate change-related actions, fully respect human rights”) has been “hardly operationalized and enforced” so far, while a fragmentation of criteria and standards across mechanisms has led to “heterogeneous approaches to the promotion of sustainable development, the consultation of local communities and access to redress mechanism”.

For instance, in the CDM case, there is no international sustainability assessment process to guarantee that projects benefitting of CERs issuance for reducing emissions are also contributing to the sustainable development of the host country. The definition of the sustainability criteria is left at the discretion of each government and the lack of mandatory monitoring requirements does not provide incentives for project participants to fulfill promised sustainable development benefits, the study says.

Moreover, although consultation with local stakeholders is requested in the CDM registration process, there have been cases in which projects have been registered despite “strong local opposition and clear evidence that projects cause harm to the local populations and/or ecosystems”, Carbon Market Watch reports.

After having considered the problems affecting CDM (that is currently undermined by a long-standing fall in CERs price) and the other UNFCCC tools, the paper put forth some recommendations to improve the social and environmental accountability of the global climate framework, such as establishing an institutional safeguards system under the UNFCCC applicable to all UNFCCC mechanisms and funds, creating an independent grievance mechanism and a UNFCCC ombudsman office.


(Image: Paris 2015 UNFCCC conference logo. Photo credit: UNclimatechange/Flickr)