Isramart : Carbon offsetting through the CDM delivers only one-third of buyers’ money to environmental projects

Isramart news:
New research shows that most of the money spent on carbon offsetting through the Clean Development Mechanism is lost to investors, brokers and other actors, rather than being spent on environmental projects.

The CDM is a large scale UN programme through which projects such as wind farms and hydroelectric dams are built in poor countries. Buyers in rich countries fund the projects by paying for carbon credits, which are used to offset their carbon footprint. But most of the money that buyers spend on carbon offsets is lost to brokers, consultants, investors and other intermediaries.Carbon Retirement, a company that provides an alternative approach to carbon offsetting, conducted the first end-to-end review of the costs in the CDM process. The research, which drew on publicly available data, shows that for every £1 that an end buyer spends on carbon offsetting, typically 31p is spent on the project’s set-up and maintenance costs.

34p goes to the broker that takes on the risk that the project may fail. The project’s investors take 19p, with smaller amounts of money being distributed between organisations involved in brokering and auditing the carbon credits.

Some individuals and companies buy credits delivered through the CDM to offset their carbon footprint. For this type of purchase, more money is lost through costs incurred by retailers. For this reason, for each £1 spent by this type of buyer, only 28p goes to environmental project.

The research methodology and full results are available at http://www.carbonretirement.com/project-offsetting-costs.

These findings are particularly relevant given the imminent UN climate change negotiations at Copenhagen. The CDM is a key point in the discussions, and this research underlines the need for reform.

Dan Lewer, a director at Carbon Retirement said: “this research shows that around 70p in every pound spent on offsetting through the CDM is lost in the complex supply chain. This is not good value for money. People and companies who are buying offsets should think carefully about where their money is going, and if there is a more efficient way of spending it.”

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Press contacts:
Primary
Dan Lewer, Director
info@carbonretirement.com +44 (0) 207 1830 188

Notes to editors
1. Carbon Retirement provides carbon offsetting by using its customers money to buy and permanently remove credits from the EU Emission Trading Scheme. This means the credits cannot be used by industrial emitters and directly reduces the amount of carbon dioxide that European industry is allowed to release.
2. The Clean Development Mechanism is a ‘flexibility mechanism’ in the Kyoto Protocol. It is primarily designed to reduce the cost of meeting Kyoto’s emission reduction targets, by allowing developed countries to set up cheap emission reduction projects in developing countries, rather than make more expensive direct emission reductions. Carbon credits in the CDM are called Certified Emission Reductions, or CERs.
3. Regulated companies in the EU Emission Trading Scheme are allowed to buy some CDM credits. In 2008, these companies used 82m CERs[1] with a market value in the region of €1.2bn (£936m[2]). Carbon Retirement’s analysis shows that if statutory buyers in the EU ETS spent €1.2bn on CERs, then €359m (£286m) was spent on environmental projects, with €816m (£650m) going to brokers, investors, consultants and other intermediaries.
4. CERs have recently been recommended by the UK government for ‘voluntary’ carbon offset buyers (i.e. individuals and organisations who are not buying offsets to comply with the Kyoto Protocol or other legal requirements)