Filzmoser said the ongoing climate talks in Copenhagen are likely to produce only a framework agreement on the CDM, leaving details to be filled out later. She stressed that it will be necessary to come to an agreement on the purpose of the mechanism before its form can be considered.
"The discussion about the CDM has to be seen in the context of the political discussions about emission reduction targets," she said. "If targets are not ambitious enough - which is the case for the moment - no mechanism that would allow offsetting half of domestic emissions is acceptable," she said.
NGOs working on the reform of the CDM system are complaining that civil society's opinions are constantly being ignored, Filzmoser pointed out. Currently, the people affected by the projects can only make comments at the beginning of the project, when developers are promising employment and new schools, but when these have failed to materialise and the credits have already been generated, there is no longer any opportunity to comment, she said.
"I think there are some easy changes that can make a big difference. If you add a commenting period in the monitoring phase of a project, you get real assessment and an incentive for developers to implement it correctly in the first place," Filzmoser said.
Flawed design
Her main criticism of the CDM relates to its design as an offsetting mechanism, which requires checking the additionality of the emission reductions against which credits are generated (see 'Background').
"Efforts to fix the CDM within its current structure will not be successful because project-by-project additionality testing is inherently subjective and impossible to do accurately," Filtzmoser said. She asserted that the benefits accruing from technology transfer hardly outweigh the problems caused by all the non-additional and outright harmful projects in the pipeline.
Hydro projects wiping out large areas of natural resources and local job losses resulting from waste management projects are just two examples of the negative consequences of the projects being implemented at the moment, the environmentalist said.
"The overarching principle of the CDM, sustainable development, is completely lacking," Filzmoser said. "Under the current scheme, host countries do not have incentives to reject projects with fewer sustainable development benefits, as this lowers their revenues and overall market share."
Overall, among the thousands of projects proposed, very few have yet been rejected due to a lack of sustainable development, NGOs point out.
According to Filzmoser, the CDM reform should provide more transparency and penalties for failing to ensure sustainability. Turning the CDM Executive Board into a professional, independent entity would be a major step, as its members are currently "directed by the interests of their home countries," she claimed.
Indeed, a new report by the International Emissions Trading Association (IETA) showed last week (4 December) that governance failures are driving investors away from the multi-billion dollar scheme. It identified a lack of CDM staff and expertise, as well as administrative problems, as a source of frustration among investors.
This uncertainty has been further exacerbated by proposals to move away from the CDM towards sectoral crediting mechanisms in the post-Kyoto era, IETA said. It called for the parties in Copenhagen to ensure that registered projects will be eligible for full crediting post-2012.
Sectoral crediting not an answer to everything
The EU has been advocating a shift to sectoral approaches in advanced developing countries to avoid the pitfalls of the project-based CDM. This would entail setting up a baseline for business-as-usual emissions in the sector, which would start earning credits once its emissions fall below the reference levels by an agreed amount.
But Filzmoser cautioned that sectoral crediting mechanisms could be rigged with similar concerns to those that plague the current CDM if the baselines and credit thresholds are not set properly, warning that targets could be watered down in the final hours of negotiations.
"Moreover, such an approach is likely to cause perverse incentives in delaying voluntary action in developing countries in order to keep the baseline up – and hence, earn credits," she warned.
Filzmoser argued that the EU's statements have spread misconceptions over when such an approach would become feasible. She claimed that it would take at least a decade to implement a sectoral crediting mechanism, while current CDM projects have crediting periods of up to 10 years.
The discrepancy becomes even more glaring when one considers the 5,000 or so CDM projects that are currently in the pipeline against the fact that sectoral approaches would begin with up to five sectors in a few countries, Filzmoser said.
The cement sector has been leading the way in exploring ways to implement a sectoral approach (EurActiv 26/05/09). Heavily concentrated in just a few countries, cement producers argue that it would be possible for them to reach an effective sector-wide agreement.
Nevertheless, the Cement Sustainability Initiative (CSI) of the World Business Council warned that confusion still reigns over what sectoral crediting actually means. It argued that many developing countries oppose the principle for fear that it is a clever way for industrialised countries to impose absolute emission caps on them by stealth.
Filzmoser was speaking to Susanna Ala-Kurikka.
