Just one third of money from offsetting programme reaches projects, report claims
Peta Hodge
7th December 2009
The efficiency of carbon offsetting through the Clean Development Mechanism (CDM) has been called into question by new research which suggests that only a third of the money spent on offsetting actually goes to fund environmental projects.
The company behind the research, Carbon Retirement, said its findings demonstrate the importance of reforming the UN-backed CDM as part of the global climate talks which started in Copenhagen today.
The CDM was established under the Kyoto Protocol to give industrialised countries some flexibility over how they meet their emissions reduction targets, though it is also used on a voluntary basis by individuals and organisations wanting to offset their carbon footprint.
It builds projects such as wind farms and hydroelectric dams in developing countries, funded by carbon credits bought by buyers in developed countries – to date, more than 1,000 projects have been registered under the scheme.
But the Carbon Retirement research suggests that for every £1 a statutory buyer spends on carbon offsetting under the CDM, typically just 31p is spent on the project’s set-up and maintenance costs.
For voluntary buyers going through a carbon offsetting retailer, rather than dealing direct with brokers, the amount typically making it through to the project is even smaller, at just 28p.
The rest of the money is ‘lost’ to investors, brokers and other participants in the process, the report says.
Carbon Retirement director, Dan Lewer, said the company’s research shows that around 70p in every £1 spent on offsetting through the CDM is lost in the “complex supply chain”.
“This is not good value for money. People and companies who are buying offsets should think carefully about where their money is going, and if there is a more efficient way of spending it.”
Carbon Retirement is itself a carbon offsetting company, but goes about it in a different way, using its customers’ money to buy, and permanently remove, credits from the European Union's Emissions Trading Scheme.
This means the credits cannot be used by industrial emitters and directly reduces the amount of carbon dioxide that European businesses are allowed to release, the company says.
Carbon Retirement’s report emphasises that CDM projects do not work in a standard way – the organisations involved, and the economics of each project will vary – so the figures its research has produced are unlikely to represent a particular project. Instead, the company claims, they provide an indication of the efficiency of the overall market.