The Sierra Club and CDM-Watch first broke the coal for carbon credits scandal occurring at the United Nations offsetting mechanism (the Clean Development Mechanism CDM) associated with the Kyoto Protocol back in July.

If you’re unfamiliar with CDM – here’s a definition from the UN:

The CDM allows emission-reduction projects in developing countries to earn certified emission reduction (CER) credits, each equivalent to one tonne of CO2. These CERs can be traded and sold, and used by industrialized countries to a meet a part of their emission reduction targets under the Kyoto Protocol.

The mechanism stimulates sustainable development and emission reductions, while giving industrialized countries some flexibility in how they meet their emission reduction limitation targets.

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The scandal discovered is that coal plants are arguing that using modern efficiency technology should be rewarded for producing less carbon than less efficient plants do. They are also arguing that without carbon credits they could not afford to install this technology.

Now, the Stockholm Environment Institute has released the new report “Coal in the CDM” that underscores the need to put an end to this scandal.  The report found (PDF) that CDM support has little to no bearing on whether projects opt for more efficient technology.

From page 7 of the report:

Project documents for Indian projects inflate the benefits of switching from subcritical to supercritical technology. Specifications of technologies currently available in the market suggest the relative efficiency and emissions improvements are likely to be on the order of 2-4%. In contrast, these coal projects are claiming improvements on the order of at least 11%, on average.

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The obvious contradictions of coal and clean in the same sentence aside, this scam threatens to undermine the clean development mechanism as well as our broader climate efforts.

The original scam was caught by a United Nations panel in July, which recommended immediately suspending credits for new, more efficient, coal plants. Unfortunately, despite the recommendation, nothing has changed since then and new plants continue to receive carbon credits for spewing millions of tons of greenhouse gases into the atmosphere.

This new report from the Stockholm Environment Institute is just another reminder of the need for action.

The fact is the coal industry is trending towards more efficient coal plants for a number of reasons (skyrocketing coal prices being one of them) without CDM funding which is being used simply as a “new revenue stream” as one company put it. In essence, the CDM has become a “clean stamp” of approval as well as a new subsidy for dirty coal.

The report also calls into question a number of other flaws inherent to these projects. The report concludes that coal project flaws are: “simply too great to warrant application of a CDM methodology.”

While these findings are important from a technical standpoint, our concern is far more basic: coal is neither clean, nor sustainable. To imply that dirty coal should be eligible for carbon credits is an Orwellian pitch that only our present batch of tea party republican candidates could make with a straight face.

The problem is that 25% of all new coal plants are doing just that by applying for carbon credits. Worse, the CDM board has already doled out a windfall subsidy of $210 million. But that’s only the tip of the iceberg. The total pipeline is 451 million carbon credits, worth roughly $3.1 billion dollars. That’s billions of dollars from the “clean” development mechanism that will go to subsidizing new dirty coal, not clean energy.

Ridiculous as the situation may seem, this is a big problem. The world simply can’t afford to continue to lavish the obscenely profitable dirty energy industry with yet more subsidies it doesn’t need. It already has more than a 100-year head-start, and trillions of dollars of taxpayer money in its pocket. As the world’s eyes turn towards the next round of climate negotiations in Durban, the United Nations must end this egregious abuse of climate finance. It must put an end to the Coal for Carbon Credits scandal.


— co-written by Mary Anne Hitt, Director of the Sierra Club Beyond Coal Campaign, and Justin Guay of the Sierra Club International Program