It’s great that climate change returns to the Senate agenda this week. The Clean Energy Jobs and American Power Act, introduced by Sen. John Kerry (D-Mass.) and Barbara Boxer (D-Calif.) seems to be gaining some momentum, but the slow pace in the Senate makes it extremely unlikely that a vote will occur before the forthcoming U.N. climate conference in Copenhagen in December.

Failure to move a bill means it will be difficult negotiators to cut deals on future emissions targets in Copenhagen. Even so, the climate talks are likely to see progress on deforestation issues, Clean Development Mechanism (CDM) reform, and, perhaps, some advancement in the understanding of sectoral mechanisms.

Kerry-Boxer is probably as tough as any bill can be in the Senate. This is not necessarily a bad thing; I think that the bill is a great step in the right direction; establishing a cap-and-trade scheme in the United States will provide the right incentives for American industries to reduce emissions in the most cost-effective way. However, as drafted, Kerry-Boxer contains a number of international carbon offset policies that are likely, if they remain unchanged, to result in wild price swings and radical shifts in offset supply. This in turn will significantly undermine the ability for U.S. companies to use investments in international offsets as a cost-containment mechanism.

What is the principle problem? The Senate, like the House-passed Waxman-Markey legislation, does treat offsets as a good cost-containment mechanism. The difference between the two, however, is where the offsets could/should come from. More specifically, the Waxman-Markey bill would allow 1 billion domestic offsets and 1 billion international offsets, for a total allowance of 2 billion. In the House bill, if the Environmental Protection Agency determines that the volume of domestic offsets is likely to be less than 900 million (and it certainly looks like it will be as the EPA has estimated the maximum domestic supply will be in the region of 500 million), then international offsets could be expanded up to 1.5 billion tons every year.

The Senate proposal is not as generous on international offsets; Kerry-Boxer sets an unrealistic ceiling for domestic offsets at 1.5 billion tons, and reduces the acceptable volume of international offsets to 500 million every year. The EPA could allow up to 1.25 billion tons of international offsets if it determines, on an annual basis, that domestic offsets are likely to generate less than 900 million tons.

This provision is very problematic for those companies covered by cap and trade. The offset provisions of the bill need to be structured to create a steady supply of offsets and a market that sends a clear, predictable price signal to the private sector. As the bill currently stands, its offset provision would create tremendous uncertainty about the demand and admissibility of international offset credits into the U.S. market.

To rectify this, the Senate should allow the EPA to review the expected domestic supply in the first year of enactment and determine the likely supply of domestic offsets in order to reset the allowed volume of international offsets to realistic levels. The EPA could subsequently monitor the market regularly, but not with a mandate to reset offset ceilings annually.

Alternatively, any adjustments to the proportion of international offsets that are allowed into the United States could be treated as a “high-water mark.” In other words, if the proportion of international offsets allowed into the United States is increased to compensate for lack of domestic supply, this should represent the new minimum volume for international credits. The proportion should not be adjusted downward from one year to the next because, as mentioned earlier, it could prevent American companies from investing in new offset projects.

International offset supply gets even more problematic when considering how proposed sectoral mechanisms would work across industry segments and geographies, and how they may interact or overlap with the CDM. In brief, it is essential that a transition to a sectoral mechanism is well thought through and does not present a disruption in the long-term price and demand signals to players in the private market.

This transition would mean that any CDM project that is registered before the start of the relevant sectoral mechanism should have its crediting period honored. Alternatively, the project developer should be given the option to transition to the sectoral mechanism within a certain period of time, say two years.

As it stands, Kerry-Boxer remains silent about how these pre-existing CDM projects would be treated, and indeed, it looks like it would simply stop issuing international offsets after 2016 for any project determined to be covered by a sectoral mechanism. This would create a disincentive for companies to invest until a sectoral mechanism is in place, losing tremendous opportunity for early action across the world. We have already seen how a lack of a long-term policy and price signals have disrupted the number of new projects entering the CDM in the last couple of years.

A special concern of mine relates to how credits from Reducing Emissions from Deforestation and Degradation (REDD) efforts will be brought to market. But stay tuned and find out more about this in my next post.

Medina co-authored this post with Toby Tiktinsky, Senior Client Manager, at EcoSecurities.

Amid the fallout from the near collapse of the global financial system and revelations of significant fraud by financiers like Bernie Madoff and R. Allen Stanford, an intense debate has emerged over the role of business in society. The increased scrutiny of Wall Street — and by extension, corporate America — has focused on profits, bonuses, and how compensation schemes can encourage excessive risk-taking. The fact that institutions deemed “too big to fail” were bailed out by the government and are now earning incredible profits only serves to entrench the feeling that something isn’t right in corporate America.

These issues deserve the added attention and should be subject to a healthy debate, but the underlying tone of the debate has begun to worry us, as it seems to question the role of business in society. You may be wondering what this has to do with the climate change debate in general, or the debate on the role of offsets in a U.S. cap-and-trade scheme in particular. Believe us, it matters a great deal.

The American Clean Energy and Security Act of 2009 (HR 2454, aka the Waxman-Markey bill) would prompt a major paradigm shift in the way private companies operate in the United States and would require tremendous deployment of capital, entrepreneurship and ingenuity, tasks for which the private sector is aptly suited. Yet given the prevailing distrust of the private sector, especially when it involves any form of “trading,” we have seen Congress adopt some command-and-control style measures.

For example, nongovernmental organizations succeeded in lobbying to have the Environmental Protection Agency (EPA) regulate methane emissions from landfills and coal mines, making them unavailable as offset projects. The rationale is that the emission reductions can be achieved quickly, meaning the emission reductions don’t need to benefit from innovation and the profit motive.

Supporters of the command-and-control approach, however, do not realize that not only are they delaying the emission reductions, but they are also undermining investment in renewable energy. Project developers have already started pulling back on plans to invest in methane capture and flaring systems due to the Waxman-Markey bill. Without carbon revenue, projects that would cap landfills and use the gas to produce green electricity are not viable. For second-tier landfills in particular, a project developer needs both the electricity and carbon revenues to make projects financially acceptable. The private sector can only thrive under political certainty; this means that methane that would have been destroyed in the near term will continue being freely released into the atmosphere until EPA mandates its destruction, with an uncertain timeframe that may take years.

Furthermore, the growing distrust of the private sector has only amplified the concerns that the environmental community already voices about offsets (quoting credible and not so credible sources). Critics believe it’s too easy to “game” the system, which undermines the environmental integrity of cap-and-trade. On the other hand, practitioners who have experienced the difficulty of getting through the current Clean Development Mechanism (CDM) firsthand would laugh at the suggestion that you can “game” the system.

However, if designed and executed properly, offsets play a critical role for the environment and the economy. Offsets not only provide financial incentives to invest in emission reductions that occur outside of the cap, but they also serve as a critical cost-control function for the system as a whole.

EPA has conducted an analysis of Waxman-Markey that predicts allowance prices given a certain supply of offsets in the market. EPA forecasts that the allowance price will be about $13 by 2015, $27 by 2030 and $70 by 2050, based on the assumption that the offset supply will reach 1.2 billion, 1.35 billion and 1.8 billion respectively in those years. The bill allows up to two billion tons of offsets every year, but EPA does not foresee the supply of offsets ever reaching the limit set by the bill.

Even so, EPA’s expectation of offset supply will be massive compared to what we have seen in the market so far. The Kyoto Protocol’s CDM, for example, has only issued about 315 million tons of offsets in total; 81 million of these were retired in the European Union in 2008. This is a far cry from what the United States will need to keep allowance prices at the levels predicted by the EPA.

To be clear, the implications for the economy are immense if the supply of offsets falls short of EPA’s expectations. EPA estimates that the cost of allowances will increase by 96 percent if offsets are not available. Offset generation will thrive under political certainty that puts together a scheme that is clear, easy to navigate and ensures environmental integrity. Furthermore, for offset generation to thrive, there needs to be a clear link between investment and reward for private participants.

For example, as argued by Sonia in a previous post, having a scheme that bypasses or undermines the role of the private sector, such as a government-to-government sectoral scheme, would be extremely ineffective. This underlines how the growing distrust of the private sector directly belies the intent of the system to reduce costs by relying on the private sector to find the lowest cost reductions in the market place.

The debate, thus, should not focus on whether or not the private sector should play a role, but how do we design a system that includes the proper checks and balances to protect environmental integrity, while ensuring it is sufficiently streamlined to allow it to generate the volume of offsets needed to keep costs low.

Time and again the private sector has demonstrated its remarkable ability to mobilize tremendous skill and resources to accomplish great feats. Sadly more recently we have experienced its other great potential: economic destruction. Yet it would be a shame to focus on the latter, as surely we can — and must — harness this power to steer the world’s economy down a low carbon path.

The Clean Development Mechanism (CDM) has already failed Africa, some observers believe, so why bother post-2012 when the existing CDM framework established under the Kyoto Protocol expires?

But as the international community prepares to negotiate a new climate pact, we should care about extending the CDM, and care a great deal.

After all, the CDM was created with the dual goals of promoting sustainable development in developing countries and reducing costs of compliance in regards to greenhouse gas (GHG) emissions in rich countries. In the early years of the CDM, the market rewarded the lowest hanging fruit — reductions in industrial facilities in countries where there were already well-established investment environments and where government institutions were relatively well developed. It’s no surprise then that most of the early projects were in Brazil, Mexico, Chile, South Africa, Malaysia and China.

Today the CDM has broadened to reach over 50 countries worldwide, including African nations like Uganda, Tanzania, Nigeria, Morocco, Egypt, and Tunisia. But we need to improve and extend the CDM to reach even more developing nations.

In 2007, while serving in my previous role as Global Head of Origination for EcoSecurities, I started focusing on business development in Africa. My first trip to scope out potential projects was to Tunisia, Ghana and Nigeria. Later we also evaluated opportunities in Ethiopia, Kenya and Tanzania, and from our South African office we tried to work with projects in countries as diverse as Rwanda, Mozambique, Mauritius, Madagascar, Namibia and Angola.

Despite our efforts, our African portfolio remains much smaller than one would expect given the resources devoted to it. Africa, we found, is a rather complicated place to work. First of all, it is extremely diverse and geographically huge. But, more importantly, the continents institutions are still in their infancy. Most African nations have only been independent for 50 years or less. As such, many governments have not evolved strong policymaking processes or had time to build the roads and rail networks needed to support economic development.

Slowly but surely, however, Africa is picking up. Unfortunately, the current debate on a post-Kyoto climate regime seems to be overlooking carbon financing as a tool for sustainable development, especially for Africa. The current debate tends to focus on competitiveness — i.e. obtaining level playing fields for industries. But this approach insinuates that only major emerging economies matter in the fight against climate change, so only those that already possess developed industry and the money to set baselines and manage major schemes can aspire to benefit from carbon financing internationally.

People in developed countries often associate Africa with high-profile “bad news” stories, such as the political violence and economic collapse in Zimbabwe, the years-long wars in Congo, or even the horrors of 1994 Rwanda and today’s Darfur. True, these are shocking and distressful facts, but they should not tarnish the substantial strides that other countries like Ghana, Botswana, Namibia and Ethiopia have made.

In the words of Youssou N’dour, one of the most well-known African singers who recently released a movie called “I bring what I love” (highly recommended by the way), developed countries need to move away from their idea that Africa is just a story of poverty and start expecting nations there to take care of their own development … and make sure they have the flexibility to do so.

Africa needs more investment (not aid) to build businesses and infrastructure. Recently, there’s been much discussion of aid’s failure to help Africa’s countries achieve certain development milestones. Carbon financing, I believe, can play an important role in boosting economic development and reducing corruption by channeling direct foreign investment to African nations for the right purposes.

Looking toward Copenhagen, it is not enough for Africa that the CDM simply continues past 2012. We need to recognize that:

• Readily available project types in Africa are different than in other developing countries. Agriculture and forestry projects have to be a priority in Africa, and the CDM should be reformed to properly address these project types, moving away from temporary crediting to using buffer or insurance products to deal with the reversal risks inherent to sequestration-based projects.
• Methodologies for clean-energy projects should reflect the reality that in Africa our aim should not be to reduce already low emissions, but to encourage societies to leap-frog to sustainable and green energy sources, bypassing coal and diesel to the greatest degree possible. This means that methodologies should be based on suppressed demand approaches, rather than on current emissions baselines.
• Bundling and programmatic approaches should be clarified and extended, including those for small-scale projects, in order to support more African entrepreneurs entering the market. Use aid for capacity building — raising the bar for entrepreneurs and companies in the region. Ideally, work with governments and other stakeholders in the country to devise long-term strategies for development (up until 2050) that include priorities and objectives for progress, while keeping in mind the future risks and challenges.
• Finally, for Africa especially, there needs to be further development of micro-insurance and micro-credit businesses that can support key aspects of a green investment regime focused on carbon mitigation.
• The good news is that these goals are achievable. We see more and more African projects in the CDM pipeline, even in today’s difficult environment.

The bad news is that we are out of time in the current Kyoto architecture, and it does not look like there will be a future for scalable carbon financing in Africa unless the United States also looks at climate change regulation as a force to promote sustainable development.

Let’s encourage the United States and other developed nations to be more ambitious in Copenhagen and put on the table not only the idea of getting China and other key developing countries to agree on emissions targets, but also the idea of reinforcing the role of CDM and pushing for much needed reforms of the mechanism addressing Africa’s challenges.

Last month I went home to Barcelona to attend Carbon Expo, one of the major annual gatherings for professionals involved in the global carbon market. There were many interesting conversations and panel discussions over the course of the three-day conference, but one in particular focused on sectoral mechanisms as a way of sourcing international offsets from emerging economies.

In my last post, I argued that a sectoral mechanism can be a powerful instrument to deliver cost-effective offsets — provided it is able to clearly link investment and subsequent returns from a private sector perspective. In relation to this, one of the panelists from the International Energy Agency (IEA) presented the conclusions from a recent study on sectoral mechanisms and carbon markets (PDF). The slide below, taken from this paper, schematically represents how a sectoral ex-post crediting mechanism may work.

With this approach there are two major problems from a private sector perspective:

1. The credits are sold to the carbon market at a country level (i.e. the government), removing direct access for a private entity to enter the market, which has been one of the most successful features of the Clean Development Mechanism (CDM).

2. A good performance from a private entity does not guarantee carbon credits in return, since it depends on other companies also operating under a country’s baseline. This is completely outside the control of an investor and therefore it introduces an incalculable risk into that investment.

IEA paper via Sonia Medina / EcoSecurities

The IEA study made the same point:

“the incentive to individual investors in mitigation may be less direct, and therefore weaker than that under a single project configuration like the CDM. Under sector-wide crediting, an entity’s good performance can be offset by the lack of progress of other entities in the sector.”

Furthermore, under the terms of the current Kyoto Protocol, we already have evidence that government-run schemes have not been as successful as the CDM, which has a more clearly defined private sector approach. Joint Implementation and the International Emissions Trading system have failed tremendously to deliver the trading and financial flows that were initially expected of them. It may be argued that this failure to deliver has been caused by the lack of a clear incentive between private sector investment and a transparent carbon reward, since both schemes are heavily dependent on government action.

Another worrying aspect of a sectoral mechanism as described above relates to timing and transition issues. It is clear that a sectoral mechanism will mean a lot more work upfront by host countries in setting up the rules, developing baselines and monitoring procedures. This raises questions as to what would happen to CDM projects that get caught in the middle of this transition. Further still, it raises questions as to how quickly countries can start delivering a flow of credible, high-quality sectoral credits that can be used for compliance commitments. If the supply is not there, the United States and other demand-side countries will see their cost of compliance increase.

One final point regarding sectoral mechanisms, that from my point of view makes them difficult to be a source of reliable compliance-grade offsets, relates to the fungibility of credits across different sectoral crediting schemes. It is not clear if all sectoral mechanisms will be governed by a single entity like the World Trade Organization or the current UN Framework Convention on Climate Change (UNFCCC), or will rely exclusively on host countries.

Worryingly, this may mean that the market could perceive the credits coming from different countries or sectors to be of differing quality, and therefore, it may create fungibility issues. Understandably, the U.S. Environmental Protection Agency may decide at that point to subject those credits to extra checks in order to accept them into a US scheme. If we thought that dealing with the UN was difficult, we can only imagine what it may be like dealing with two governments that have conflicting priorities.

I remain convinced that sectoral mechanisms can be quite powerful if applied correctly, but from what I have seen in the United States and Europe, further debate is required. It is tremendously important we get this right, otherwise it could be a missed opportunity for businesses and governments to tackle climate change cost-effectively, while unleashing large amounts of private capital to develop a new green economy.

It is also of special relevance in the United States because the Waxman-Markey bill clearly relies on offsets as a cost-containment strategy, having established a theoretical limit of 2 billion offsets per year. Domestically, it is already clear that the potential supply will be well below 1 billion, especially if the EPA ends up regulating landfills and coal mine-methane.

Therefore, international offsets need to play a crucial role in controlling costs of compliance in the United States. If sectoral mechanisms fail to deliver, as I think they will, then U.S. businesses will face a tremendous shortage of offsets and will suffer from an unexpected increase in compliance costs.

At times certain words become quite fashionable, though nobody is quite sure why. Everyone wants to use them, even as they can have different meanings for different people. In the discussion of climate change in the United States, “sectoral” seems to have achieved this particular honor over the past few months.

Before we start, let’s do a quick test. When policymakers use the term sectoral, what do they mean?

1. A command-and-control measure at a national level, e.g. low-carbon fuel standard or a sector-specific tax?
2. A transnational cap-and-trade sectoral agreement, e.g. aviation or maritime?
3. A commitment by a nation or group of nations to commit to intensity targets for a certain sector, e.g. tCO2/unit of production in cement or aluminum?
4. An improved Clean Development Mechanism (CDM) whereby methodologies include simplified baselines following benchmarking across key sectors?
5. All of the above

The correct answer is No. 5 — all of the above, which demonstrates the problem. As such, we really need to define what we mean by sectoral. The dialogue among U.S. policymakers would have sectoral mean everything from command-and-control measures in an industry inside America’s borders to an enhanced market-mechanism like the CDM.

The problem is that while fashionable here, the term is viewed far less benignly in developing countries, where sectoral is perceived as an interim step towards getting them to agree to future CO2 emissions targets without concessions from rich nations. Get ready for a fight at international climate change negotiations in Copenhagen at the end of the year.

This is especially relevant because the draft climate change and energy bill introduced by Reps. Henry Waxman (D-Calif.) and Ed Markey (D-Mass.) envisions credits for international offsets created by specific industries (i.e. sectors) in countries that have some sort of bilateral or multilateral emissions agreement with the United States. As far as we have been able to tell, nobody quite knows what this means, but the final interpretation will create or stop billions of dollars of climate-friendly investment.

Therefore, shouldn’t we at least get our terms straight?

I understand that U.S. policymakers are concerned about creating (or keeping) a level-playing field for American industries. There are understandable concerns that cement, steel, auto manufacturing and other industries could lose competitiveness if foreign counterparties do not face similar emissions requirements. In theory, a sectoral approach should be viable for an industry that has relatively few important actors across the globe. From what I understand, this is what motivated the Cement Sustainability Initiative (CSI) of the World Business Council for Sustainable Development to push for a transnational cement sector agreement.

But after seven years of hard work, the parties agreed that a transnational cement agreement was simply too hard to reach. The compromise was to write a benchmarking methodology for CDM projects that will be submitted shortly to the CDM Executive Board for consideration. This will not be the first plan that the CDM board approves with that approach. A few months ago the first benchmarking methodology for energy efficiency refrigerators using an intensity baseline was passed.

What the cement industry learned in the very arduous process should not be underestimated. A main disadvantage of a sectoral approach is that it requires an enormous amount of data, which is either too expensive to gather or simply unavailable in many developing countries. The CSI took seven years to develop a methodology for CDM — not because it takes so long to write a methodology, but because creating a common reporting language and gathering data was challenging and time-consuming.

As I mentioned before, there is tremendous resistance from developing countries to agree to anything that resembles a sectoral approach, due to the implications about setting a path to future targets and costs. China is slightly more open to the idea, but other countries — including India, South Africa and Brazil — seem to jump out of their seats any time someone pronounces the word. I’m not entirely joking.

Understandably, these countries feel that having to agree on a sectoral baseline strongly resembles a direct cap on their emissions in that sector, which they find unfair given their historically small role in generating substantial industry-driven carbon emissions. It’s hard to blame them, as the U.S. would think and advocate the same way if the situation was reversed. A further concern in the developing world is that a sectoral approach would resemble international emissions trading under Kyoto i.e. trading emissions units between governments — and would be likely to provide very poor incentives for the private sector, which these countries know they need to engage.

Sectoral approaches are definitely complex, but there are certain concrete policy areas that can benefit from these tools:

1. Aviation and Maritime: These sectors can benefit from sectoral agreements that tackle the ownership issues and other complexities of cross-border regulation that neither the CDM nor national emissions inventory frameworks are able to.

2. Benchmarking: Use data collected from the thousands of registered CDM projects improve and simplify benchmarking methodologies for measuring emissions from various sectors.

3. Technology Transfer: Export-driven technology dissemination is a goal that virtually all participants in the climate process rally behind. This could be achieved by modifying the CDM to provide credit to businesses that export energy-efficient equipment to other countries. For example, Japan has been pushing for ways to achieve emissions credit for its efficient technology development. A sectoral approach could fit well with this aim.

The sectoral approach is no silver bullet, but if we use it wisely and rationally it can become a great source of learning for the next stage of carbon market development, a crucial step to addressing climate change. Now we just need to define the term.

A hot-blooded Spanish creature like me can get into an argument relatively easily, and I’m not afraid to argue strongly about what I know and/or believe. Can you picture Penelope Cruz in Vicky Cristina Barcelona when she argues with Javier Bardem? Yep, that’s me!

In the last four months here in the United States, I have attended quite a few conferences, gatherings, meetings, cocktails, you name it. At all of them I have found myself discussing carbon offsets, specifically the contribution of the Clean Development Mechanism (CDM) — the project-based market mechanism under the Kyoto Protocol that channels foreign investment to clean projects in the developing world in return for carbon credits — to confronting climate change.

The lack of understanding of the CDM in the United States is rather shocking. I have heard eye-rolling comments like, “It is a joke that closing a coal power plant can generate CDM credits” (well, indeed it would be, if it were true).

The good thing is that my debating skills are getting better, so irrational critics of the CDM beware!

The United States is finally committed to tackling climate change, and even though there is some discussion about the shape of climate legislation (carbon tax vs. cap-and-trade), it seems the most likely outcome is that the U.S. will end up with a cap-and-trade program. There is major debate about whether offsets should be allowed into the scheme, but it’s really the only rational outcome since offsets are an effective price-control mechanism.

So, why does the CDM matter to the United States? Because if the U.S. does not want to create false expectations in industry with regards to its real capacity to use offsets, there is no time to reinvent the wheel. Building an offset-accreditation system takes time. A long time. American industry will suffer if the supply of offsets is not sufficient to help with price control, especially in the short-term while companies roll out their internal strategies and infrastructure changes.

The truth is that the CDM has already generated a high-quality pipeline of international projects that can provide a good source of offsets to U.S. companies covered by regulation. In my six years with a project-offset development company, I have been a fiery (remember, I’m Spanish) critic of the CDM. But these criticisms are aimed at improving an emerging system, not dismantling it.

Too many critics in the United States simply want to throw the baby out with the bath water. The real opportunity is to learn from the experience and use the fantastic negotiating power of the U.S. government and economy to improve the system. I’m still wondering if criticisms here have to do with the perception that the CDM was not “made in America.” In fact, the CDM was actually born in the USA.

What are the positives and the negatives of the CDM? The negatives are that successful early projects are extraordinarily concentrated — fewer than 30 projects have generated approximately 70 percent of total credits to date. The system also is overly complicated, making it difficult for small projects to gain access, and the comparatively short period since Kyoto means the CDM has had too little time to incentivize en masse new technologies or really bring high-end technology to key developing markets.

On the positive side, a highly complex system is already up and running (this is very important), and more than 1,350 projects have already been approved by the UN to generate credits (with over 3,000 more in the pipeline). The gross current projection is 1.3 billion tons of carbon reductions through 2012, which is worth tens of billions of dollars of investment and trade flows to the developed world.

“Learning by doing” has created significant expertise and an entrepreneurial culture around emissions trading — a whole new industry and lots of jobs (my company alone has gone from 25 to 300 employees in the six years since I joined). The CDM has accelerated existing technology uptake in new markets, and one can clearly argue that the CDM has provided solid proof that markets can indeed achieve social objectives. Finally, some of the failures that my colleagues and I have railed about can be attributed to “over-success” and regulatory stress rather than fundamental flaws in the CDM.

On a project-scouting trip to Vietnam, my colleagues and I visited with officials to discuss a landfill in a city located near the Vietnamese capital. When you fly to countries like Vietnam and encounter officials from a small and poor area excited about being able to resolve the problems posed by their city’s landfill because the sale of carbon credits will provide an extra boost in revenues that will make the installation of biogas collection and flaring systems economically viable … well, it is a difficult-to-describe feeling, but pride is certainly in there. It is even more impressive to see this knowledge cross cultures and languages.

The Vietnam example shows that the CDM is working and is worth keeping; promoting these kinds of projects and entrepreneurs throughout the world is the only way we will truly address climate change. Keeping and improving the CDM should matter to the United States, not only because it makes sense for American companies to have a good pipeline of offsets available, but also because if the U.S. is serious about its international reengagement and developing a global clean energy infrastructure, this is a mechanism worth using.