Wikileaks and the CDM

The cable is a goldmine - it provides clear evidence that non-additional projects (those that do not provide real emission reductions) are being supported.

And even better, the statements come directly from the horses' mouths -  project developers, a former head of the CDM Executive Board, project auditors, financiers and CEOs of major Indian industrial companies.

Below I pick out some juicy quotes to peak your interest. While no explanation is really needed, I offer my interpretation. Check out my blog next week for a more elaborate analysis of the cable and the various issues that it touches on.

Have fun and be prepared to be shocked at how candid CDM participants are about the need to game the system.

SUBJECT: CARBON CREDITS SUFFICIENT BUT NOT NECESSARY FOR SUSTAINING CLEAN ENERGY PROJECTS OF MAJOR INDIAN BUSINESS GROUPS

Translation: Most clean energy projects in India are not additional - i.e. they could be realized even without the extra financing from carbon credits.

However, they [carbon credit boosters]  conceded that no Indian project could meet the "additionality in investment criteria" to be eligible for carbon credits.

Translation: The CDM is unncessary - these projects are happening anyways.

[Somak Ghosh, President of Corporate Finance & Development Banking at Yes Bank], pointed out that no bank would finance a project which is viable only with carbon revenues because of the uncertainty of the registration process, unclear guidelines on qualifying CDM projects and because carbon revenue is only a by-product revenue stream of the main operations of the company.

Translation: Banks don't finance truly additional projects, since the risks with the CDM registration process are too high.

He [Ghosh] admitted that project developers prepare two balance sheets to secure funding: one showing the viability of the project without the CDM benefit (which is what the bank looks at) and another demonstrating the non-viability of the project without the CDM benefit.

Translation: Lie if you want the sugar coating of the carbon credits from the CDM.

At a seminar on CDM in Mumbai, R K Sethi, Member Secretary of the [Indian] National CDM Authority and the present Chairman of the CDM Executive Board, publicly admitted that the National CDM Authority takes the "project developer at his word" for clearing the "additionality" barriers.

Translation: Concoct a convincing story that your project is additional and I'll believe you. Note: Sethi is no longer on the Board - his term has expired.

Mathsy Kutty [of Det Norske Veritas (DNV), a CDM Executive Board-accredited
validation and verification organization for CDM projects], is concerned that [Ultra Mega Power Plant] (UMPP) Project will be rejected by the CDM Executive Board, as the use of supercritical technology in all UMPPs is a mandatory requirement stipulated by the Indian government.  As this technology is the norm for all UMPPs, it has to be put in place by the project developer with or without the CDM benefit. Proving additionality is therefore difficult, she continued. (Comment: Ironically, DNV acted as the validator for the Mundra UMPP and, as per Patkar, has already validated the project.  End Comment.)

Translation: Since the project developer pays the validator to recommend the  project to the CDM EB, it is no surprise that often validations are positive, even when the projects are clearly not additional. No wonder DNV was the first CDM auditor to be suspended by the CDM Executive Board. The CDM provides perverse incentives for developing countries to not enact more stringent environmental standards.

[Shishir] Tamotia, [CEO of Ispat Energy which is owned by the brother of steel magnate Lakshmi Mittal], complained of increased scrutiny of projects both by the CDM Executive Board and by validators. He also pointed out that validators "overdo it and raise unnecessary objections to try and makethings perfect". 

Translation: Just believe our claims - there is no need to do a check.

[Pamposh] Bhat, [Director for Climate Change at GTZ], urged companies to think of
"innovative" ways to qualify CDM projects.

Translation: If you try hard enough you'll find a way make your project look additional.

High energy prices and the cheap supply of equipment from China are making CDM projects viable without the CDM credit, [Tamotia] said.

[Ram] Babu, [the Managing Director of CantorCO2e's operations in India (a global project and emission trading consultant)] said that CDM benefit is a bonus and noted that most of the projects are implemented even before being registered to earn carbon credits.  Excluding "business as usual" projects from qualifying is "killing" Indian projects, he added.

 B Agarwalla, the Executive Director of Tata Power, argued that all measures resulting in improved energy efficiency should be eligible for carbon credits, even if they are adopted to enhance profitability.

Translation: It is in our financial interest to become more efficient. The CDM is not a motivator and our projects are viable without the CDM. But it sure is nice to get a subsidy we don't need. And who cares if crediting non-additional projects actually allows the CDM to increase global emissions.

Check out my blog next week for a lengthier and in-depth analysis of the various issues raised by this cable released by Wikileaks.