CSE- Climate Change Briefing Papers and Fact Sheets Section

12.10 Acquisition period: Certified emissions reductions (CERs) can be obtained from 2000 upto the beginning of the first commitment period, that is, 2008, and these CERs can be used to achieve compliance in the first commitment period from 2008 to 2012.

This provision has been criticised by several experts as a loophole which is called Superheated Air. Only emissions reduced within the commitment period should be taken into account. It reduces the impact of the KP in addressing the build-up of greenhouse gases and thus addressing the problem of climate change.

Critique of CDM: CDM is just a form of Joint Implementation amongst developed and developing countries. Because developing countries had insisted on a five-year pilot phase for JI called Activities Implemented Jointly (AIJ) at CoP-I held in Berlin in 1994, JI has surfaced again under a new name. A review of AIJ has yet to be undertaken.

Till recently, developing countries have strongly opposed the JI concept. They have argued that this is just a way of pushing the action into the developing world whereas it is the industrialised world which should be taking action because it is the emissions of the industrialised world that have created the problem. But in the Berlin CoP, when countries like India pushed the industrialised countries to develop time-bound targets for cutting carbon dioxide, the industrialised countries in turn pushed India and others to accept JI. Finally, a five year experimental phase called Activities Implemented Jointly (AIJ) was accepted in which no credits would be given. As a result, Western companies and countries have shown little interest and the experimental phase, scheduled to end in 1999, has not gone anywhere.

The only existing rational for JI, one that is being globally pushed at the moment, is the one that was outlined by the government of Norway in the early 1990s. The Norwegian government had argued that cutting carbon dioxide emissions in industrialised countries will be more expensive than cutting carbon dioxide emissions in developing countries. This is because developing countries are using outdated technologies which are very energy-inefficient whereas developed countries are already using very energy-efficient technologies. So if Norway wants to cut its carbon dioxide emissions then it should financially assist India to acquire more efficient power stations but the credit for the saving that would thus result in carbon dioxide emissions would go to Norway. Similarly, it can be argued that developing countries can be given money to plant trees on a big scale to remove some carbon dioxide from the atmosphere because it would be cheaper to plant trees in developing countries instead of developed countries, largely because land and labour are cheaper in developing countries. This is not surprising. Raul Estrada-Oyuela, the Argentinian head of the negotiations in the Adhoc Group on the Berlin Mandate told a journalist in 1997, "Of course, everything is cheaper in the developing countries — including life."

In other words, a country like Norway need not change anything domestically and yet meet its carbon dioxide emission reduction targets by investing in JI projects in other countries.

Many experts and countries have, however, argued that it is false to assume that it is very expensive to reduce emissions in the developed countries. The key problem is the high political cost. For instance, people do not want higher energy prices restricting their use of the car.

Even if the rationale for JI is accepted, there are several serious practical problems with JI:

a. Firstly, there is the economic question. If developing countries accept JI then all that they are doing is to let the cheaper carbon dioxide reduction programmes go to industrialised countries. Let us assume that JI works and developing countries move towards more energy-efficient technologies. But once they have reached high levels of energy efficiency, industrialised countries would have no economic incentive to invest in developing countries. They would rather invest in their own countries. And if global warming is still a threat — as it would be, because industrialised countries which are major producers of greenhouse gases, have not taken serious action at home — then there will be pressure on developing countries to cut back on carbon dioxide emissions on their own. And by then the costs of cutting back on carbon dioxide emissions will be very high even for developing countries. So what will be the form of international cooperation then? CDM does not answer this question. It leaves the future of North-South cooperation on climate change hanging in the air. Meanwhile, current generations of developing countries would have traded away their cheaper emissions reduction measures and left the more expensive measures to be borne by their future generations.

b. Secondly, there is the question of practicality. How will one differentiate when is a more energy-efficient technology being brought into a developing country to cut carbon dioxide emissions and when is it coming simply because foreign or domestic industrialists want to move towards better technology for competitive reasons. After all, technological upgradation takes place all the time. New cars definitely have less carbon dioxide emissions per km than the older ones. So will all foreign manufacturers of new cars be allowed to take the credit for reducing carbon dioxide to their home countries?. There is also the danger that companies can use CDM to push all kinds of experimental technologies that may not be economically viable otherwise. Developing countries could get used as technological guinea pigs.

In recent years, several proposals have emerged on the shape that JI can take. The US and several international agencies are now pushing for an approach that combines the idea of the Norwegian type of JI and emissions trading. Under such a scheme, an agency like the World Bank could work with developing countries to prepare a portfolio of projects which industrialised countries can pick from, pay for the extra cost incurred in saving the carbon dioxide that would have otherwise not been saved, and take the credit. Such a scheme would force developing countries to compete amongst themselves. Those schemes which offer the cheapest carbon dioxide reduction would be the most likely to be picked up. In fact, the World Bank is formulating precisely such a scheme called the Global Carbon Initiative which aims to develop a Global Market for Investments in Controlling Gases that cause Global Warming.

At the UN General Assembly Special Session held in June to review the progress since the Rio Conference, President Bill Clinton offered $1 billion to help developing countries cut back on their carbon dioxide emissions. Costa Rica is the first country to show interest in an emissions trading programme of the kind proposed by the US. Costa Rica has initiated a research project to quantify the carbon in plants and soils in order to establish a baseline against which to compare the effectiveness of JI projects.

The principle of CDM should be accepted by developing countries only if and when there is a clear agreement on the principles which define each country’s entitlement to greenhouse gas emissions. Accepting CDM without a simultaneous acceptance of the entitlement principle, means accepting a few dollars today in return for leaving the future open to unjust pressures. And the key factor defining this entitlement principle should be per capita emissions. Factors like energy-efficiency, if they are to be considered at all, must be of a secondary nature. Once this principle is accepted, then the sale of the unused annual share of the entitlements of a country could be done bilaterally — between India and USA, for instance — or through an intermediary like the UN or the World Bank.