The Indian Clean Development Mechanism (CDM): Subsidizing and Legitimizing Corporate Pollution

December 17, 2011

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An Overview of CDM in India with case studies from various sectors

A study by NFFPFW (National Forum of Forest People and Forest Workers), NESPON, and DISHA (Society for Direct Initiative for Social and Health Action). Compiled and Edited by Soumitra Ghosh and Subrat Kumar Sahu.

Executive Summary

Ever since the unique mitigation strategy of carbon trading was conceptualized in the Kyoto Protocol, India seems to have been one of the busiest countries to put the concept into action. By the end of June, 2011, India had 645 CDM projects registered with the UNFCCC, 261 of which had already been issued 93834 kCERs. At that point of time, India accounted for 1603 CDM projects (it has since gone up to 1914, as of 8th November 2011), including the registered and CER-issued ones, with 922 at validation, and another 36 at various stages of registration. Taken together, the projects claim to reduce a whooping 444293 million tonnes of CO2 equivalent by 2012(meaning that the same amount of tradable CERs will be credited to the projects, if UNFCCC registers them all). The corresponding figures for 2020 are 1516432 ktCO2 meaning that, taken together, the projects will reduce about 1520 million tonnes of Green House Gases.

With such eloquent figures on the board, one likes to know a little about the reality of this emission-reduction. Even the most cursory of looks at the Indian CDM scenario sees not much other than good and solid corporate profiteering. The global economic recession and the resultant lull in the carbon market worldwide could not diminish the Indian market’s slow-to-take-off but unbridled enthusiasm for Carbon Credits.

Looking at India’s CDM scenario in terms of corporate participation, we find that the energy efficiency sector, including HFC, is generating the maximum CERs. Big corporations such as Tata, ITC, Reliance, Ambuja, Birla, Bajaj, GFL, HFL, NFIL, and many others, who ritually emit millions of tonnes of carbon dioxide into the biosphere earn handsome returns in the name of ’clean development mechanism’. The current market price of a ton of CO2 reduced and sold in form of CERs in the global market is anywhere between 6 and 10 Euros, even in this ‘bearish’ situation, whereas the most optimists of carbon consultants would not have given more than 5 dollars in 2005!

The corporate hegemony over Indian CDM seems to be no less than absolute. Profits not only from large industries hosting energy-efficiency projects, but also relatively low-key and ‘sustainable’ renewable-energy projects in the biomass and wind sectors went to the corporate sector up to 16th May 2011, corporations collared about 90 percent of the country total of 8108 kCERs issued to biomass projects, and they also own most of the CDM wind projects in India.

Some of the profit figures for companies engaged in the carbon trade are astounding. Till early 2008, the Jindal group made 11-billion rupees (and perhaps more) from selling supposedly ‘reduced emissions’ (1.3-million CERs) at their steel plant in Karnataka. The Tata Motors sold 163,784 CERs from clean wind projects at 15.7 euros/CER in 2007. Tatas’ sponge iron projects in Orissa are set to yield 31,762 CERs every year. Reliance publicly boasts of its CDM Kitty—with seven registered projects with an annual CER-potential of 88,448 (till 2007 December),four more CDM projects under validation with an annual total of 149,533 CERs, and seven more potential CDM projects to generate about 4 lakh CERs per year. In 2007/08 alone, the GFCL group’s earning from carbon money was thrice its total corporate profit (after tax).

The disturbing fact is that the PDDs(project-design documents, which the top consultants like Price-Waterhouse Coopers and Ernst &Young prepare on a turnkey basis for the projectholders, against a fat fee) these companies submit to the UNFCCC are full of half-truths and lies. Most of the CDM projects from which ground-level community reactions are available are found to be as polluting as any other industrial project, besides exhibiting barefaced violations over the mandatory social commitments.

The main problem with these projects’ claims of reducing GHG Emissions is that there is no credible way to verify these claims. Dirty and utterly ineligible projects routinely sail through, without bothering to clean up their acts. Though the projects are ‘validated’ by overseas ‘agencies’ like DNV, who certify that the projects validated by them are ‘in effect’ reducing emissions, there is no monitoring of the validating agencies themselves, many of whom have been accused of half-done and highly manipulative jobs. For instance, the CDM Executive Board suspended DNV in 2008 November, saying that their audit process was questionable.

Though there is a proviso in the CDM mechanism that the projects must result in all-round sustainable development and benefit communities where those are located, the CDM projects in India barefacedly violate the sustainability criteria. Because the Indian government doesn’t have any regulatory mechanism to enforce compliance, this practice goes on unchecked.

Click here to read the full study [176 pages, PDF] »

Excerpt from 1st Chapter: The CDM Fraud

Fraud? Yes, one must clearly use the word, talking about carbon trading in general, and Indian CDM projects in particular. The main problem with these projects’ tall—and immensely profitable—claims of reducing GHG Emissions is that there is no credible and definite way to verify these claims. The validating agency is an organisation paid by the project, and it gets paid to prove that the project is doing what it is claiming to do, and not otherwise. Though it ritually invites comments on projects it validates, such comments are as a rule ignored. The result is that dirty and utterly ineligible projects sail through, and make money, without bothering to clean up their acts.

The biggest instance of this is the Waste Heat-based energy projects, mostly located in various sponge iron plants. These projects are legally required to operate Electro-Static Precipitators or ESPs, to ensure that the smoke emitted by the plants remain reasonably clean. Because an ESP is an expensive machine to run, the plants mostly do not operate it(see case studies). Because the ESP remain inoperative most of the time, the waste heat project, which is technically dependant on continuous running of the machine, does not work. That the ESPs do not run is known to everybody, the State Pollution Control Boards, the villagers near the plants, the workers. Yet, the Indian Government approves these projects’ CDM claims, the Validator validates, and the UNFCCC registers and issues CERs. Quality-wise, there is no difference between VERs and CERs from such a project; the pollution caused by it continues all the same. UNFCCC certification means a few more wads of paper from the validating agency, and the occasional methodological explanations offered by the project proponent.

Contrary to popular belief, such papers, however well-written and convincing, prove nothing, least of all, the emission reduction claims. Instances of irregularities and fraud are not confined to sponge iron companies; they cut across sectors. Several large thermal power plants in India have applied for CDM status of late and two of those are already registered with UNFCCC (the Tiroda Plant by the Adani group, and the Sasan Plant by the Reliance) despite complaints of large-scale land grab and rampant pollution at the project sites in Maharashtra and Madhya Pradesh (see case studies).

Irrespective of sectors, all CDM projects we could study so far display a surprising uniformity in community level impacts: they pollute (large and small industrial projects including the so-called ‘clean’ biomass power projects), displace (‘renewable’ and ‘green’ wind power and large and small hydro, large industrial projects) and destroy or enclose commons (forests, agricultural fields, pastures). Not a single project was found to yield any discernible benefits for the local economy, society and environment. CDM projects generated no new jobs apart from a few temporary posts of security guards here and there, and all tall talks of corporate social responsibility etc disappeared once a project got going.

The case studies included in this study will therefore may often sound repetitive. The monotony of illegal exploitation of both resources and people is not broken by the usual ‘success story’; and each narrative seems to be the re-run of another. In a way, these narratives follow the largely cut-and-paste sustainability claims in the PDDs, but only in an inverse way.

An Example of a Case Study from Orissa

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Contents

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Click here to read the full study [176 pages, PDF] »

4 Comments »

4 Responses to “The Indian Clean Development Mechanism (CDM): Subsidizing and Legitimizing Corporate Pollution”

  1. MRC Says:
    March 14th, 2012 at 12:39 am

    Most DOEs are Frauds , they accept money to hide facts abouts the projects. The emplyoees of UNFCCC especially some members of RIT are corrupted by money or favours. UNFCCC is a body that provides licence to pollute , just for the sake of keeping the jobs…

  2. Anonymous Says:
    June 21st, 2012 at 11:20 am

    this site is very informative and very much into the wellness of the country

  3. Anonymous Says:
    June 21st, 2012 at 11:35 am

    There is an error in the 1st paragraph it says 11 nov. 20111
    pls make a correction

  4. Sudha Pundita Says:
    June 21st, 2012 at 11:55 am

    Yes, it is true that the members of UNFCCC are mostly corrupted but it is not right to say that Indian govt. is not doing anything …..
    It is just that the govt. is unable to place objection to these big companies that are producing so much of Carbon Di Oxide… the companies are powerful….that’s where the problem comes in…