This article is a joint publication of TheNation.com and Foreign Policy In Focus.
The World Bank’s job is to fight poverty. Key to lifting people out of poverty is access to reliable modern energy. It makes sense. Kids do better in school when they can study at night. Microbusiness owners earn more if they can keep their shops open after sundown. And when women and children don’t have to gather wood for cooking they’re healthier and have more time for other activities.
What doesn’t make sense is using a failed scheme—like carbon trading—to pay for it.
Carbon trading was developed as a way for industry to comply with laws limiting greenhouse gas emissions more cheaply. Companies that can’t or won’t meet carbon caps can purchase surplus allowances from others that have kept pollution below legal limits.
The UN established an international system called the Clean Development Mechanism (CDM) to make it even cheaper for businesses in rich countries to meet carbon regulations by paying for clean energy projects in developing nations. Purchasing these offsets through the CDM was promoted as a new way to provide financing to poorer countries.
But the poorest countries most in need of climate and development money generally don’t benefit from the CDM. First, they often don’t have large industrial or fossil fuel-based energy sectors that generate significant volumes of carbon pollution. Also, it takes enormous time and effort to verify project plans, register with the CDM and validate that emissions have been cut, making it impractical for investors to finance small projects that only generate a low number of carbon credits.
That was the case even before the CDM “essentially collapsed,” in the words of a UN-commissioned report on its future. Weak emissions targets and the economic downturn in wealthy nations had resulted in a 99-percent decline in the price paid for offsets between 2008 and 2013. There was also evidence that the scheme’s largest projects actually increased greenhouse gas emissions. Add on the tax scandals, fraud, Interpol investigations and human rights violations, and the scheme had fallen into disarray.
Ci-Dev to the Rescue?