The Clean Development Mechanism (CDM) is a primary means of carbon trading by which developed states meet their international obligations to cut greenhouse gas emissions below dangerous levels of emissions. At the same time, the CDM is intended to provide developing countries some badly need financing for their mitigation and adaptation efforts.
The CDM is allowed, but not required by the Kyoto Protocol. When the US proposed CDM in the Kyoto Protocol negotiations, developing countries objected to them en masse. The CDM nevertheless came into existence as a compromise between developing countries who wanted to ensure developed countries limited their greenhouse gas emissions, and the developed countries seeking to use their dominate position to make their task of cutting emission easier. Ironically, the US remained outside the Kyoto Protocol regime even after having facilitated the uncomfortable compromise that led to the CDM.
Article 12 of the Kyoto Protocol states that the "purpose of the clean development mechanism shall be to assist ... [developing states] ... in achieving sustainable development and in contributing to the ultimate objective of the [UN Framework Convention on Climate Change (UNFCCC)], and to assist ... [developing states] ... in achieving compliance with their quantified emission limitation and reduction commitments under Article 3 [of the UNFCCC]."
The first objective of the CDM stated in the Kyoto Protocol is to assist states in achieving sustainable development and contributing to the ultimate objective of the UNFCCC. It is uncontroversial on its face. In the sense that the CDM helps states to achieve the objectives of the UNFCCC, it merely reiterates existing treaty obligations. It does this mainly through a 2 percent tax on each Certified Emission Reductions (CER) credit, which are issued through the CDM to states which fund emissions reducing projects, and providing the funds raised to the Adaption Fund, which provides funding for adaptation projects in developing countries.
More controversial is the second objective of the CDM, which is to make cutting emissions less painful for states by allowing them to use the CDM to avoid having to cut their own emissions. Instead, well-developed, wealthy states can buy the right to pollute through CDMs. These countries finance projects that reduce emissions, buying CER credits from projects undertaken in developing countries.
In principle, safeguards exist requiring that a developed state seeking CER credits from a CDM project first obtain the permission of the developing state hosting the project, and that the project make a contribution to sustainable development. In practice, however, this permission is often forced by threats of other aid cuts or merely the unmet substantial needs of the developing state for their own development. In addition, developed states seeking CER credits must show that the CDM projects are "additional" and would not have been undertaken in the developing state in the normal course of business. Again, however, because developing countries rely on investment from developed countries, which often subsidize CDM projects, there are significant incentives for public and private investors to try to undertake projects under the CDM framework. In other words, the CDM carbon markets perpetuate themselves.
The rules regarding CDMs and their market-basis have led to very few CDM projects being undertaken in the almost 50 least developed countries in the world. While this is the case, Article 12, Paragraph 10 of the Kyoto Protocol allows states to get credit for projects undertaken between 2000 and 2005 the time between when the Kyoto Protocol text was adopted and entered into force.
The CDM is the second largest carbon market in the world. Since its inception in 2001 it has issued about a billion CER credits, according to the latest figures presented by the CDM Executive Board. Each credit equals one ton of carbon dioxide. This accounts for more than 10 percent of all the carbon dioxide released into the atmosphere each year, although the CDM figures are, of course, spread over almost a decade.
Many developing states are again pushing for the continuation of the CDMs even as they are pushing for the end of emission reduction commitments under the Kyoto Protocol. In other words, they are trying to it both ways: eliminate the obligations they have to contribute to combating climate change, while at the same time earning credits for having done something when they have a financial incentive to act.
In addition, because of the market mechanism behind the CDMs, developed countries are able to push down the price of CER credits in CDM projects by cutting project costs. This provides an incentive to do the work on the cheap. While safeguards of state approval exist, these have been often been avoided or applied in meaningless fashion because the state so badly needs the investment. Conversely, private actors seeking to get CDM funding for a project in a developing state have been known to exaggerate carbon emissions so that they can later claim to have reined them in, gaining even more CER credits.
In principle, CDMs are authorized by Article 12 of the Kyoto Protocol, so on their face they are legal. However, the Kyoto Protocol contains obligations for developing states to cut their emissions. These obligations, according to Article 3, Paragraph 12, and Article 12, Paragraph 3(b) of the Kyoto Protocol Annex I, developing states may use the CER credits earned by CDMs to meet their obligations.
The Kyoto Protocol is a protocol to the UNFCCC and this is expressly referred to in Article 12, Paragraph 2, of the protocol. As such, states must ensure that any action taken under the Kyoto Protocol is consistent with their obligations under the UNFCCC. Actions that may be allowed by the Kyoto Protocol, but are inconsistent with the provisions of the UNFCCC are thus illegal.
Whether or not the CDMs are legal therefore depends on whether they are consistent with the provisions of the UNFCCC. In this respect, the overall objective of the UNFCCC is of primary importance. A treaty must always be interpreted in a manner that is consistent with its object and purpose according to customary international law, a principle which has also been agreed by most countries in the world in Article 31, Paragraph 1, of the Vienna Convention on the Law of Treaties.
The ultimate objective of the UNFCCC is the "stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system ... while at the same time ... allow[ing] ecosystems to adapt naturally to climate change, to ensure that food production is not threatened."
The deficiencies of adequate controls, the incentives for abuse, the lack of reliable measurements of a benefit of limiting carbon dioxide emissions, all point to uncertainty about whether or not CDMs contribute to "stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system." Researchers arguing that CDMs actually contribute to dangerous levels of greenhouse gas concentrations in the atmosphere are not difficult to find.
Recently, Neil Tangri and Dharmesh Shah of Global Alliance for Incinerator Alternatives have argued that a significant waste management project in India could add more than 500 million tons of carbon dioxide emissions. When CDM projects contribute to an increase in greenhouse gas concentrations in the atmosphere, they likely violate the provisions of the UNFCCC and create responsibility for the states involved.
This is not the only way in which CDMs might be contrary to international law. Article 2 of the UNFCCC also states that states shall reduce anthropogenic gases to below dangerous levels in the atmosphere while at the same time ensuring that economic development proceeds in a sustainable manner. Thus CDMs should contribute to sustainable development, but when they block sustainable development or make it more difficult they are contrary to the UNFCCC obligations.
Dr. Beth Jean Evans pointed out that market-led CDMs do not appear able to contribute to sustainable development in developing states. The author concludes that an "abandonment of market mechanisms may be necessary to facilitate the substantive participation of Southern nations in global emissions abatement efforts which is required by the severity of the climate crisis." If Evans's well-researched conclusions are correct, as they appear to be, then CDMs might actually be hindering the achievement of sustainable development in developing states. If this is the case then they are an obstacle to the achievement of the objectives in Article 2 of the UNFCCC and violate this treaty.
The legality of the CDM depends on several variables which are to date unsatisfactorily confirmed, but the preliminary evidence that is available is sufficient to support the claim that a significant number of CDMs violate international law. Thus while the CDM as a whole may be legal, it may also give rise to many illegal activities. Such a situation is at least bad policy regardless of its legality.
Curtis Doebbler is an international lawyer with an office in Washington DC, a professor at Webster University and the Geneva School of Diplomacy and International Relations, both located in Geneva, Switzerland, and the representative of Nord-Sud XXI at the UN in New York and Geneva.
Suggested citation: Curtis Doebbler, Kyoto's Clean Development Mechanism and International Law, JURIST - Forum, Dec. 19, 2011, http://jurist.org/forum/2011/12/curtis-doebbler-cdm-legality.php.
This article was prepared for publication by Jonathan Cohen, the head of JURIST's academic commentary service. Please direct any questions or comments to him at firstname.lastname@example.org