Some Carbon Credits Are Just All Wet

Massive hydroelectric dam projects in China and other countries are being marketed as viable carbon credits -- but under some very faulty logic, according to an AP report released today. Let's see why.

At the heart of the problem are the credits allowed under the UN's Clean Development Mechanism (CDM), a Kyoto-approved carbon market system. Carbon markets, you might remember, assume that we're all living under a giant bubble: if one country reduces its emissions, they're making a net subtraction for everyone in the bubble. This country now gets to market its subtractions as credits to other nations that don't want to bother with reductions. Under CDM, industrialized countries can buy carbon-reduction credits from developing countries (explained nicely here). What's the problem, then?

AP rightly points out the problem of "additionality" - if you're going to build a dam anyway to generate more power, you're not making a dent in the existing carbon levels of our little globe. Now, fix an existing nasty coal plant and lower its emissions, or replace a coal plant with a cleaner energy supply -- that will. And we haven't even mentioned the ecological and cultural damages that rampant dam projects can cause.

But it's a tough call. We like carbon credits because they allow polluting companies/nations to make some difference, and sooner. We like hydro projects because they are a form of clean energy. But not all credits are alike, and many dams are built with insufficient ecological considerations. The UN says it will be improving the CDM program, so stay tuned. Meanwhile, if your company or government is buying carbon credits or portfolios, do the due diligence.


(For a satirical take on the controversy over carbon markets, check out the classic CheatNeutral. Hey, as long as there is less adultery in the world overall, I can just pay someone else to not cheat, right?)

***NOTE Jan 27, 2009: I'm sitting in a lecture by Bryan Murray of the Nicholas Institute, and someone in class just mentioned that CDM is also rather unaffectionately called "rip-offsets"...