LONDON (Reuters) - The U.N.-backed carbon offset market needs an overhaul as it lacks transparency and is vulnerable to bribery and collusion that threaten efforts to help developing nations cut their growing carbon emissions, researchers in Britain said.
A report from the University of East Anglia and University of Sussex on Tuesday warned that the Kyoto Protocol’s emissions offset market could become “a rich man’s club” of project developers, emissions verifiers and government officials, without benefiting the poor.
Under the protocol’s Clean Development Mechanism (CDM), companies and governments in rich nations can develop emissions-reduction projects in the developing world in return for carbon offset credits.
The researchers said governance of the offset scheme does not function properly, while CDM finance is seen as extra revenue for big corporations keen to prop up existing investments in fossil fuels.
“This is undermining the credibility of the CDM by prolonging the life of the very industries that most need to transition to a lower carbon economy,” they wrote.
Problems of governance at the local level have been “almost entirely neglected,” the paper said, adding that many project consultations are inaccessible to many people in poorer communities.
“Lack of transparency and monitoring can also be to the detriment of project developers, who find hearings hijacked by local officials wanting a bribe in return for support for the project.”
The researchers released the paper weeks before the start of a U.N. climate summit in South Africa, where representatives of more than 190 nations will discuss the future of the Kyoto pact and its market-based mechanisms, which expire at the end of 2012.
Martin Hession, chair of the CDM executive board, said he welcomes a debate on improved governance and that the board will launch a high-level policy dialogue on the CDM in Durban.
“Governance is a shared responsibility and under our rules host countries in particular are responsible for ensuring projects deliver sustainable development,” he told Reuters in an emailed statement.
The CDM has delivered “transformative” investment, real emissions reductions and social and environmental benefits through a pipeline of 3,500 projects in 70 countries, he said.
Hession rebuffed the criticism that the offset market lacks transparency and reinforces the status quo or props ups big corporations’ existing investment in fossil fuels.
Under the CDM, a project must pass a set of environmental checks and balances before it is registered at the U.N. and awarded with carbon credits - each credit equals one tonne of carbon dioxide (CO2) equivalent.
But more than half of the 773 million credits issued so far went to two controversial project types that cut industrial gases — mostly in China. The European Union will ban the use of credits from these projects types in its carbon market from May 2013 due to concerns over environmental integrity.
Peter Newell, a professor at the University of Sussex and one of the authors of the paper, argued the CDM has not lived up to expectations in delivering technology, jobs and other health and environmental benefits to poorer nations.
“This has not occurred on anything like the scale hoped for, largely because projects are not, on the whole, assessed for whether they deliver these things and therefore do not get paid for them,” he told Reuters in an emailed statement.
The roles of project developers, independent emissions verifiers and government officials overlap in some cases, while some government bodies appointed to oversee the CDM lack transparency and predictability, the researchers say.
“Many stand accused of collusion with project developers and their own accountability and redress mechanisms are often either weak or non-existent,” the paper said.
Reporting By Jeff Coelho; Additional reporting by Nina Chestney; Editing by Anthony Barker