Carbon Scams: The Risks Ahead

Alejandro Litovsky

October 24, 2009

The $100 billion carbon-trading market is called into question after the world’s largest auditor of clean-energy projects was suspended by United Nations inspectors. SGS UK has had its accreditation suspended as a result of being unable to prove that its staff had properly inspected the projects it was accrediting for carbon trading or that its staff was properly qualified to do so.

A report by Greenpeace has helped direct attention to one particular case, the Noel Kempff project in Bolivia, which illustrates the potentially disastrous pitfalls of the growing market for forest offset projects (REDD), raising critical questions about the pathways forward.

The Bolivian project started in 1996, driven by The Nature Conservancy and Fundación Amigos de la Naturaleza (FAN). The following year, the Bolivian government signed an agreement with three polluting energy corporations: American Electric Power (AEP) BP-Amoco (BP) and Pacificorp. Under the agreement, the corporations would pay to protect almost 650,000 hectares of rainforest for 30 years. In return, the carbon offsets generated allowed the companies to continue polluting.

But the lack of adequate monitoring, verification and assurance of REDD projects are key obstacles in the way. Critics rightly fear that these loopholes could turn the proposed carbon market solution into a cover-up for growing emissions-as-usual in the developed world.

Between 1997 and 2004, Greenpeace found that “AEP, Pacificorp, and BP reported about 7.4 million tons of carbon offsets from the Noel Kempff project to the US Department of Energy. This is considerably more than the amount verified for the 30 year project: 5.8 million tons. Greenpeace explains that the investors “may have claimed millions of tonnes of CO2 emissions reductions that never occurred”.

The highest risks are around the long-term guarantees that the forests in question will remain intact, argues REDD-monitor, which is impossible to guarantee. Besides the challenges of effective law enforcement and governance in Bolivia, drought, forest fires, pest infestation, disease could all have a dramatic impact on the forest in the project area.

In a rapidly changing climate such threats to the forest become more likely to happen. If AEP, BP-Amoco and Pacificorp have already used the project to offset their emissions and the forests were to be destroyed, this would double the volume of CO2 emissions.

In the meantime, 49 leaders of the main social and environmental movements in Brazil have jointly called on the Government of Brazil to reject REDD as a carbon market-based mechanism and on using REDD as a way of compensating emissions from Northern countries.