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July 19, 2011

Sierra Club India: More on the CDM Coal Scandal

Coal is the most carbon intensive fuel on earth. So using scarce climate finance to build the world's largest new coal plants as a tool for reducing carbon emissions may sound like a joke. But with five projects already approved under the United Nations Clean Development Mechanism (CDM) for windfall profits of nearly $1 billion dollars, and 31 more lining up at the trough, a United Nations methodology panel isn't laughing.

The panel found that the methodology under which projects are applying has overstated "emissions reductions" by 25-50%. Worse, some projects "that claim emissions reductions, in fact, might have caused an emissions increase." Citing these findings, the panel called for the immediate suspension of the methodology.

But just days after the UN panel called for a suspension of the methodology, controversy swirled as yet another Indian Ultra Mega Power Project, Krishnapatnam in Andhra Pradesh, was registered for credits. This is the same project that has been at the heart of recent violence and oppression in India's coal struggles.

This project exemplifies the growing coal scandal in the CDM. Inflated baseline emissions aside, this project is unquestionably non-additional. According to CDM rules a project cannot be additional if it is "the only alternative amongst the ones considered by the project participants that is in compliance with mandatory regulations..." The government of India has declared that all new ultra mega power projects (UMPPs) "shall be based on supercritical technology."

Worse, the project has secured all the necessary financing, bought the land, began construction, and ordered all of the critical components before proponents knew if they could receive CDM funds. Instead, the company described CDM funding as a "new revenue stream" to its investors.

Sadly, it seems that the CDM Executive Board is asleep at the wheel. Despite the methodology panel's urgent recommendations the Dutch Executive Board member Lex de Jonge responded to the panel by saying it "should start working on it to see if there is a serious problem." If grossly overestimated "emissions reductions," and flagrant violations of additionality are not enough to constitute a "serious problem," it's hard to see what the Executive Board believes would be. In light of the board's gross negligence, this issue is quickly growing into a global scandal.

With India's coal crisis continuing to rage, the windfall profits the CDM is doling out only throws fuel on the fire. The thought that the very same projects that are leading to war zones, violence, and death, would be considered "clean" or capable of contributing to "sustainable development" is patently absurd. That these same plants would be lavished with hundreds of millions of dollars in windfall profits by claiming these titles is simply Orwellian; An interpretation of reality that only exacerbates the deep wounds of Srikakulam District and Krishnapatnam port in Andhra Pradesh.

It's time the CDM's lack of oversight ended, and these coal projects, along with the methodology under which they are applying, was thrown out of the CDM for good.

-- Justin Guay, Sierra Club International Program

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