Carbon Credit Watch

Carbon Boondoggles

April 26, 2007

To reduce greenhouse-gas emissions, Canada’s federal government plans to push Canadian corporations into buying carbon credits under the so-called “Clean Development Mechanism” (CDM), a system established under the Kyoto Protocol by which companies in rich countries buy “rights to pollute” from companies in poor countries. The poor-country companies, in exchange, promise to give up their own greenhouse-gas producing activities.

The scheme, if implemented on the large scale sought by its backers at the World Bank and other Western development agencies, may or may not lead to reductions in greenhouse-gas emissions in rich countries. It will certainly succeed in harming the environment and the livelihoods of millions of farmers, fishermen and indigenous peoples in the Third World.

Over the last four decades, Western development agencies such as the World Bank, the UN’s Food and Agriculture Organization, and national aid agencies such as the Canadian International Development Agency, have financed massive hydro dams, the removal of Amazon forests, and industrial projects in the Third World, leading to the forced relocations of hundreds of millions of people from rural lands and the wanton pollution of urban communities.

The development agencies were forced to back off only after opposition from local peoples became fierce through riots and hunger strikes, and public opinion in the West turned away from these ruinous megaprojects. Hundreds of hydro dams, rainforest highways, industrial tree plantations and other boondoggles have been cancelled as a result since the late 1980s.

Today, with the Kyoto treaty and Clean Development Mechanism strengthening their hand, the very same development agencies are now repackaging the boondoggles as carbon-saving projects qualifying for carbon credits that can be sold on the global carbon market.

To qualify as a CDM project, projects must be large – the UN typically favours projects expected to save millions of tons of greenhouse gases per year. As a result, smallholders are being expropriated by large private or public corporations, or otherwise coerced into selling out. In the case of a CDM forestry project, for example, a land mass of about 1,000 hectares would need to be assembled. In countries where land holdings are small, the landholdings of hundreds of families would need to be assembled into plantations.

Even in relatively prosperous countries such as tiny Costa Rica, where the average landholding of family plots is about 50 hectares, 20 farms would need to be assembled to create a single CDM project. To exacerbate the problem, the needed land assemblies will need to grow incessantly to meet UN targets. Costa Rica, total area five million hectares, needs to assemble at least 15,000 hectares per year to meet FAO targets, leading local community organizers and environmentalists to prepare for expropriation battles.

Most of the CDM projects to date are slated for India, which has about 350 CDM projects in the works, including large hydro dams and nuclear plants. India’s record to date is not promising. For example, Jindal Steel and Power, which runs the world’s largest spongeiron plant, is developing four CDM projects, courtesy of the sale of carbon credits and amid claims of forged documents that allowed the controversial projects to go through. These projects are being fought by 32 communities that have suffered air and water pollution in the surrounding area for years.

Likewise, villagers are protesting Nalwa Sponge Iron, MSP Steel, Salasar Industries, Shivshakti Factory and Anjani Steels — all Indian CDM beneficiaries – for polluting their croplands. In 2005, villagers resorted to blocking a national highway in protest against Monnet Steel Industries’ plans to seize 120 hectares of their land. Protests also broke out in India against another land grab – this one by Ind Agro Synergy, another firm with a UN-validated CDM project. Protests against CDM projects, in fact, are o ften the order of the day. They have occurred in Thailand, where protests have stalled a biomass power plant, and in West Bengal, where villagers oppose a textile factory’s pollution, among numerous other examples.

Against the backdrop of CDM-created confrontation in developing countries that are presumably benefiting from the carbon credits, large questions arise as to whether CDMs even accomplish their goal of economically reducing greenhouse gases.

In the case of Costa Rica, studies by the FAO and the Forest and Climate Change Project in Central America concluded that they don’t have the data to account for increased or decreased carbon storage since plantations began in the 1990s.

In Ecuador’s Andes, an 8,000-hectare plantation set up by a group of Dutch power companies is absorbing far less carbon than expected. Because it is also prone to fires that release unanticipated carbon into the atmosphere, some now estimate that the net carbon balance is negative. As with other CDM projects, the local communities are aggrieved, claiming that their environment has been damaged and that the promised benefits – well-paying jobs – never materialized.

In some cases, CDM projects fail because local opposition wins the day. In Uganda, where the indigenous Benet people were left homeless and hungry after their forest lands were expropriated to make way for a plantation, the courts have set back a CDM project after the Benet took the government to court. The Benet have won the right to return to their traditional land, with the right to farm, but the conflict is carrying on.

The only clear beneficiaries of CDM projects are the aid bureaucracies that oversee growing fiefdoms, and the corporations that have learned to game the system. A striking example of how Third World corporations cash in on CDMs came earlier this week, with revelations from India of SRF, a company that produces refrigeration gases. After spending a mere $3-million to reduce its emissions, SRF then used its CDM earnings to expand production of another greenhouse gas, one that is 100 times more damaging than CO2. SRF now stands to make a profit of $670-million from its expansion, paid for by British companies Shell and Barclays.

In the last year, more egregious examples still have emerged. There can be no doubt that billions of dollars that could be well spent in legitimate development are being squandered on CDM schemes that are unwelcome in the Third World, where they do harm to the environment and the economy alike.

Grainne Ryder is policy director at Probe International, a Toronto-based environmental group.


Links

World Bank, Carbon Finance for Sustainable Development, Annual Report 2006.
The World Bank is developing carbon credit schemes in Senegal, Madagascar, Botswana, Nigeria, and Mozambique. The Bank-managed BioCarbon Fund is financing commercial plantations and carbon-storing reforestation schemes in the following countries: China (4,000 hectares); Costa Rica (4,000 hectares); Honduras (3,000 hectares); Nicaruaga (600 hectares); Uganda (2,000 hectares); Columbia (8,600 hectares); Democratic Republic of Congo (8,000 hectares for fuelwood and charcoal production); Dominican Republic (6,000 hectares); Madagascar (5,000 hectares); Mali (15,000 hectares), Niger (8.800 hectares).
http://www.carbonpositive.net Carbon Positive (UK)
Carbon Positive, a consortium of UK companies that includes Sun Biofuels (UK), Shell Foundation, and Britain’s Independent Power Corporation, is investing in carbon credit plantations in China’s Yunnan province, and Brazil’s Amazonia region, and is pursuing projects in Ghana, Ethiopia, Colombia, and Indonesia.
http://www.carbontradewatch.org Carbon Trade Watch (UK)
http://www.cdmwatch.org Clean Development Mechanism Watch (Indonesia)
CDM Watch, “The World Bank and the Carbon Market: Rhetoric and Reality,”
April 2005.
Most of the carbon offset examples cited by Probe International were documented by UK-based activist/author Larry Lohman in his book, Carbon Trading, which was published by Dag Hammerskjold Foundation of Sweden in September 2006 and is available for download from Cornerhouse. Larry provides an exhaustive critique of CDM using case studies from Brazil, Costa Rica, Ecuador, Guatemala, India, Sri Lanka, Thailand, and Uganda. Much of the field research is credited to local groups and researchers including: Marcelo Calazana and Winnie Overbeek of Espirito Santo (Brazil), Friends of the Earth (Costa Rica) Patricia Granda of Accion Ecologica (Ecuador), Soumitra Ghosh of North East Society for the Preservation of Nature (India), the National Forum of Forest Peoples and Forest Workers (India), and the World Rainforest Movement (Uruguay).
Department of Foreign Affairs and International Trade, CDM/JI Office
According to David Steuerman, Senior Program Officer, Canadian companies will be allowed to use CDM credits for meeting up to 10 percent of their domestic emissions reduction obligations under the federal governments’ new green plan. Steurman reports there are approximately 25 UN-approved CDM projects worldwide with Canadian involvement. Further details are available only on the UN CDM web site, not the Canadian CDM site.
http://www.development-today.com Development Today (Norway)
Soumitra Ghosh (India), “Aid, CDM and some open questions,” May 2, 2007;
Ulla Tornaes (Denmark), “Climate proofing aid, promoting CDM in Africa,” April 19, 2007; “Danes target grey zone in OECD rules on aid and carbon credits,” March 27, 2007.
http://www.cseindia.org Centre for Science and Environment (India)
Down to Earth, “Biodiesel and the expansion of oil palm plantations,” May 2006.
International Atomic Energy Agency, “Nuclear Power for Greenhouse Gas Mitigation, Austria, November 2000.
http://www.irn.org International Rivers Network (USA)
International Rivers Network and CDM Watch, “CDM large hydro status note for the World Bank/IETA Carbon Expo,” June 2004. A majority of the hydro projects funded by the Bank’s Prototype Carbon Fund are large scale hydro (over 10 MW):
  • 39-MW Rio General dam in Costa Rica for 1.4 million credits
  • 78-MW Rio Amoya dam in Colombia for 1.8 million credits
  • 55-MW Hornitos dam in Chile for 1.5 million credits
CDM hopefuls include a series of large-scale hydro dams along Brazil’s Madeira River, a large Amazon tributary, part of a multi-billion dollar regional infrastructure plan backed by the taxpayer-funded Inter-American Development Bank. If completed, the dams will block migratory fish, and adversely affect the land and livelihoods of thousands of river bank communities. Brazilian groups fighting the Madeira dams include Brazil’s Dam-Affected Peoples’ Movement http://www.mabnacional.org.br and the Rondonia Energy Forum arturmoret@ig.com.br
Panos Institute, Photos and testimonials of people displaced by aid-financed development projects in India, Pakistan, Lesotho, Kenya, Zimbabwe, Botswana, and Namibia.
PointCarbon, “UK television report raises questions about CDM in India,”
February 8, 2007.
Sinkswatch tracks carbon offset projects, including Brazil’s Plantar plantations, particularly where forest people’s land rights are disputed. The group opposes World Bank funding of monoculture tree plantations and challenges CDM methodology used to verify the amount of carbon stored in plantations in developing countries.
The Times, “Indians Make Cool 300 Million in Carbon Farce,” April 22, 2007.
www.wrm.org.uy World Rainforest Movement (Uruguay and UK)
Chris Lang and Timothy Byakola, “A funny place to store carbon,” December 2006. Case study of the indigenous Benet peoples’ struggle for their land versus Uganda Wildlife Authority and the Dutch carbon offset foundation, FACE.
Background Sources
Asia Times Online, Japan’s CDM Rush to BRIC Countries,” March 30, 2007.
http://cdm.unfccc.int/index.html Clean Development Mechanism
http://www.cdmafrica.org/ Clean Development Mechanism Africa
http://cdm.ccchina.gov.cn/english/ Clean Development Mechanism China
Clean Development Mechanism Indo German Energy Programme
Economic Times Online, “India churning out more carbon copies,” May 4, 2007.
Friends of the Earth (UK), Joint statement on offsetting carbon emissions by Friends of the Earth, Greenpeace and WWF-UK.
Inter Press Service News Agency, “Green Investment to Get Boost from New EU Fund,” April 25, 2007; “Sale of Carbon Credits Rise, Amid Complaints,” Keya Acharya, September 8, 2006.
South African Institute for International Affairs, “Carbon Trading – A New Source of African Finance,” September 2005.
World Energy Council, Primer on Clean Development Mechanism, Prepared for World Energy Council Asia-Pacific Region Members, CRL Energy Ltd., New Zealand

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