Day: May 10, 2007

Clean Power That Reaps a Whirlwind – New York Times

That program, the Clean Development Mechanism, has become a kind of Robin Hood, raising billions of dollars from rich countries and transferring them to poor countries to curb the emission of global warming gases. The biggest beneficiary is no longer so poor: China, with $1.2 trillion in foreign exchange reserves, received three-fifths of the money last year. And as a result, some of the poorest countries are being left out.

Scientists increasingly worry about the emissions from developing countries, which may contribute to global environmental problems even sooner than previously expected. China is expected to pass the United States this year or next to become the world’s largest emitter of global warming gases.

The controversy is that China, India and Brazil together are gobbling up close to 80% of the UN Clean Development Mechanism Funds. What is the CDM?

The Clean Development Mechanism (CDM) is an arrangement under the Kyoto Protocol allowing industrialized countries with a greenhouse gas reduction commitment (so-called Annex 1 countries) to invest in emission reducing projects in developing countries as an alternative to what is generally considered more costly emission reductions in their own countries.

In theory, the CDM allows for a drastic reduction of costs for the industrialised countries, while achieving the same amount of emission reductions as without the CDM. However, critics have long argued that emission reductions under the CDM may be fictive, and in early 2007 the CDM came under fire for paying €4.6 billion for destruction of HFC gases while according to a study this would cost only €100 million if funded by development agencies.

Source wikipedia.
The Kyoto protocol was supposed to be a starting point for further negotiations. Unfortunately, the U.S pulled out and put negotiations towards a better worldwide mechanism on the backburner.

Back to the issue at hand? This program is supposed to help countries that are expanding their energy use fast to develop clean sources of energy. India and China are both developing at breakneck pace, and every bit of wind energy that goes in there is one less Megawatt from coal. Yes, the money is not going to Africa, but Africa is not developing infrastructure at that pace (the reasons for that have filled many books!). This program is not meant to foster development, it is meant to facilitate clean development wherever development occurs. So, if China is developing the fastest, it has equal rights to access these funds to put in a wind energy infrastructure.

If you want China and India to stop using these funds and use some of their own money to develop clean energy, you have to redesign the program to include a rider that takes into account the affluence of the country. The more money a country has, the less it gets from the CDM, or it has to atleast pony up a bigger share. You also have to put in the infrastructure in poorer countries that can take advantage of these funds. Without a power distribution infrastructure, or a functioning government or bureaucracy, how do you expect a poor country in Africa to take advantage of a complicated credits based funding program?

Development is complicated stuff, and distortions like these happen all the time. When the Kyoto protocol was negotiated, China was not rich, now it has a little more money. Development situations are fluid and demand flexibility in action, and constant monitoring. If the world’s richest country does not participate, and actively trashes the UN continuously, old and imperfect agreements stay in power even longer. U.S disavowal of the Kyoto protocol has the effect of making the protocol’s distortions even stronger and delaying action to fix them.