The ENDS Report — July 2007, issue 390 ($ub. rqd):

ENDS has learned that chemical corporation Rhodia is using carbon credits from the Clean Development Mechanism (CDM) to meet voluntary corporate targets — only to sell them at a profit to be counted again elsewhere. Cement company Lafarge has not ruled out the same practice.

Companies like Rhodia can use CDM credits to comply with mandatory targets under the EU Emissions Trading Scheme. But they can also use them to meet voluntary carbon reduction commitments or to make “carbon neutral” claims, or sell them on the market.

Rhodia and other companies are counting the credits they generate towards their own voluntary emissions reductions and then selling them, thereby enabling other organizations to claim the reductions as well.

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This is not a problem of a “few bad apples,” or a flaw in the offset market that can be fixed. The fundamental problem with offset trading is that compliance is less transparent than a tax or auctioned permit system or even old-fashioned, non-market regulation. There is more room for deliberate gaming, and more room for honest error. At the same time, a working offset market depends on fewer errors and more precision than other means. An offset that is a formal permit to pollute (like CDM) actually increases emissions if it is implemented less than perfectly. Offsets such as CDM don’t make allowances for human imperfection to the same extent other means of controlling carbon emissions do.

[Update] Stephan Singer Head of European Climate and Energy Policy Unit of the World Wildlife Fund claims that if LaFarge in fact does sell their voluntary credits on the CDM market they will be violating their agreement with WWF.