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CDM Attacked in New Report

The Clean Development Mechanism (CDM) initiative, the UN-backed program to offer carbon offsets, came under a new round of criticism after a report by the WWF and Germany-based Oeko-Institute.

According to a Reuters report, the CDM program suffers from ambiguous rules and fails to demonstrate that the energy projects it certifies would not get funded without offsets. The report also cited unqualified or poorly trained employees, lack of independent review and disregard for internal processes as significant problems. CDM received similar criticism the year before.

The CDM is a $2.7 billion program created as part of the Kyoto Protocol on climate change that allows companies to generate carbon emissions offsets by investing in clean energy projects. The projects are then audited by third parties known as Designated Operating Entities (DOEs) to certify that the emissions reductions being claimed are real. The program has audited 6,200 projects so far.

But the DOEs received sub-par report cards from WWF and Oeko. The study gave its highest grade, a D, to German auditor TUEV-Nord, while SGS received an E+ and DNV received an E. Several auditors were suspended by the UN inspectors last year after accusations of fraud. Tuev-Sued has remained under suspension since March.

The report also found that CDM’s executive board requested more corrections from auditors last year than the year before, but said it could not determine whether that was due to increased vigilance on the part of the board or more mistakes being generated by the auditors.

The UN will soon publish the results of a panel meeting which could include significant changes to the CDM program.

The CDM regime has also come under criticism that many global companies are gaming the system by artificially inflating greenhouse gas production specifically to get credit for destroying them later. Activists are arguing that as much as a third of all CERs are illegitimate. The World Bank has also criticized the auditing process as being too expensive and time consuming while others have said the program fails to reduce greenhouse gasses at all.

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