When is the last time you were paid for NOT showing up for work? Or better yet, got a bonus for doing the exact opposite of what you’re supposed to?

That’s exactly what the backers of massive coal projects are asking the Clean Development Mechanism Executive Board to do when they apply for carbon credits. They are asking the CDM to financially compensate them for building new coal plants that will lock in decades of new carbon emissions because these plants are using more efficient technology than would otherwise be used, according to the developers. Sadly, the CDM is falling for it.

The Clean Development Mechanism (CDM) allows carbon reducing projects in the developing world to earn certified emission reduction credits, or carbon credits, for each ton of CO2 emission reductions. These credits can then be traded or sold to developed countries, allowing the latter to meet their emission reduction targets under the Kyoto Protocol.

Just days after a UN panel recommended immediately suspending the CDM methodology for coal projects, yet another project – the “Ultra Mega” Krishnapatnam coal-fired power plant in costal Andhra Pradesh — was registered. The project will provide developers with over $165 million, and it is just the latest example of the CDM allowing windfall profits to end up in the hands of coal developers.

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Coastal Andhra Power Ltd., looking to learn from its parent company, Reliance Power’s profitable dealings with the CDM, argues that it needs carbon credits to afford modern technology to make the plant more efficient and reduce emissions. Ignoring for a moment the sheer audacity of ever awarding carbon credits to a project that will emit tens of millions of tons of carbon every year, Costal Andhra Power’s claims are clearly false.

The truth is that all of India’s Ultra Mega Power Projects (UMPP) are required by the government to install supercritical technology. Coastal Andhra Power also secured all the necessary financing, bought the land, began construction, and ordered all of the critical components before they knew if they could receive CDM funds. The carbon credits will do nothing to promote additional emission reductions.

Indian coal-fired plants have a particularly strong incentive to install efficiency technology, as the country will import up to 57% of its future coal supply (PDF), making projects highly vulnerable to changing prices.  In fact, Costal Andhra Power just halted work on the Krishnapatnam plant due a hike in the price of Indonesian coal.

Of course they’re going to install efficiency technology to make the plant less vulnerable to price fluctuations. By perpetrating the farce that this technology is additional, the CDM is only encouraging increased coal development over clean, renewable energy that would provide real, long term emission reductions and be a more reliable energy source.

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Since the technology will be installed with or without CDM help, Coastal Andhra Power will simply use the money, as it tells its investors, “as a new revenue stream.” Moreover, because the carbon credits aren’t actually aiding any real emissions reductions, the CDM is creating artificial credits in order to dole out these windfall profits.

But that’s not all. Coastal Andhra Power will receive these credits for building another massive energy project in a region that is already a hotbed of violence as developers attempt to forcibly subdue local communities protesting the damage to their water and society. Parts of Andhra Pradesh are increasingly being described as war zones as activists resist 63 coal-fired power plants. It is unconscionable that the CDM support this project when villagers have died attempting to protect their land from coal development.

When the UN panel evaluated the CDM’s methodology for supercritical coal plants, they found that emissions reductions were overstated by 25-50%, and “in the worst case the implementation of the project that claims emissions reductions, in fact, might have caused an emissions increase.

Aside from rewarding companies for using “new” technology that is already standard and would be installed regardless of CDM funding, the CDM methodology inflates baseline calculations which further increases the “emissions reductions” these plants can claim. This happens because the baseline efficiency that these new plants must improve on is over 10-years-old — woefully out of date considering the natural progression of efficiency measures in the industry over time.

Coal leaves a toxic legacy of pollution for our climate as well as for local environments and communities. It simply has no place in a sustainable future, and the ongoing scandal over the CDM’s support for coal companies will not fade until the Executive Board suspends this methodology. With five projects approved, and 31 more in the process of applying, billions of dollars worth of carbon credits are at stake.

The question is, will the CDM stop subsidizing massive coal projects, or will it continue to be asleep at the wheel, ignore glaring facts, and continue to dole out corporate handouts to coal companies?

— Co-written by Mary Anne Hitt, Sierra Club Beyond Coal Campaign Director, and Nicole Ghio, Sierra Club Organizer.