From Tilak´s Substack

By Tilak Doshi

On Thursday, the UN Framework Convention on Climate Change (UNFCCC) Article 6.4 Supervisory Body approved the first batch of carbon credits under the Paris Agreement Crediting Mechanism. The project? A South Korean-backed clean-cooking initiative in Myanmar, issuing some 60,000 tonnes of CO₂-equivalent emission reductions from efficient cookstoves. Some in the climate commentariat celebrated a “major milestone” in the UN’s Paris Agreement.

UNFCCC Executive Secretary Simon Stiell hailed it as proof that markets can deliver “real-life benefits”:

Over two billion people globally are without access to clean cooking, which kills millions every year. Clean cooking protects health, saves forests, cuts emissions and helps empower women and girls, who are typically hardest hit by household air pollution… [the new mechanism] can support solutions that make a big difference in people’s daily lives, as well as channelling finance to where it delivers real-life benefits on the ground.

Paris not much better than Kyoto

Given the appalling living conditions of people in very poor developing countries such as Myanmar, most if not all more fortunate observers among us would very much wish that the UNFCCC can “channel” finance to deliver “real-life benefits on the ground”. Article 6.4 is the direct descendant of the Kyoto Protocol’s Clean Development Mechanism (CDM) and its supervisory body is tasked to promote a global carbon market.

The CDM was a United Nations-run carbon offset scheme under the Kyoto Protocol allowing countries to fund greenhouse gas emissions-reducing projects in other countries and claim the saved emissions as part of their own efforts to meet international emissions targets. The CDM, defined in Article 12 of the Protocol, was intended to assist predominantly developing nations achieve “sustainable development” and reduce their carbon footprints, while assisting industrialised nations to achieve compliance more cheaply. The CDM logic under the Kyoto Protocol was rooted in basic environmental economics: equalising marginal abatement costs across industrial sectors and countries to achieve any given level of global emission reductions at the lowest possible total cost.

Despite CDM’s theoretical elegance, the market for carbon credits collapsed under abuse, fraud and conflicts of interest. In 2012, an UN-authorised report said governments urgently needed to address the future of the CDM and suggested the CDM was in danger of collapse. By that point, the value of a Certified Emission Reduction had dropped to $5 per tonne of CO_2, from $20 in 2008. The following year, the price abruptly crashed to less than $1. As a result, thousands of projects were left with unclaimed credits. The pattern is depressingly familiar. Rich-country governments and corporations buy cheap paper credits from developing-world projects. Consultants, validators, auditors and NGOs collect fees. Global emissions keep rising but the planet is ‘saved’ by spreadsheets.

Recall the CDM’s record. Between 2001 and 2012 it issued over 1.8 billion Certified Emission Reductions. China and India alone accounted for more than 70%. The HFC-23 scandal remains the poster child for how the perverse incentives may have increased net global emissions. Chemical plants mainly in China and India ramped up production of this super-potent greenhouse gas solely to destroy it and claim millions of credits. Other projects suffered inflated baselines, non-additional hydro dams and outright corruption.

Leading accounting firms were implicated. India’s Centre for Science and Environment documented in 2005 how PricewaterhouseCoopers and Ernst & Young produced fraudulent project design documents — cut-and-paste exercises that bypassed requirements. The Paris Article 6.4 mechanism was sold as the fix to the failings of the CDM: tighter methodologies and more conservative accounting. The Myanmar cookstove project issued 40% fewer credits than under old CDM rules. Yet ‘additionality’ remains impossible to prove objectively. That is, if there were no such project under Article 6.4 in Myanmar for more efficient woodstoves, would the people not have benefitted from normal economic growth (including say the use of LPG for clean indoor cooking)?

It is not often noted that the Paris Agreement itself is a non-binding pledge-and-review charade. China’s and India’s emission reduction targets (‘nationally determined contributions’ or NDCs) were found to be weaker than business-as-usual projections. Peer-reviewed analysis by Bjorn Lomborg showed that even if every country fulfilled every promise by 2030, the temperature reduction by 2100 would be a risible 0.048°C. Extend the pledges and you still get only 0.17°C. The UN’s own models agree.

Now, despite the well-documented failures of CDM, the UNFCCC is now engaged in a second attempt to graft a global carbon market onto the Paris Agreement. And despite the Trump administration adopting a series of executive orders and policy actions to put the final nail into the coffin of the global environmental agenda, the climate industrial complex — UN and Brussels bureaucrats, environmental NGOs, carbon management consultants, rating agencies, accounting firms and auditors — shows no let-up on the Net Zero mantra. Every new carbon credit rule generates billable hours. Carbon Market Watch has already flagged over-crediting risks in the Myanmar cookstove projects. A pipeline of 165 ‘transitioning CDM projects’ is being fast-tracked under UNFCCC Article 6.4.

The Fatal Conceit of Controlling the Climate

History is littered with theoretically elegant mechanisms that failed such as the CDM. The EU ETS (Emissions Trading System) is the world’s largest greenhouse gas emission trading scheme. It has been repeatedly rescued after over-allocation and fraud. According to Europol, the EU ETS has been a “waste of taxpayer funds” through bloated administrative overhead, fraud enforcement, lost VAT revenue and corporate subsidies disguised as ‘market mechanisms’.

UNFCCC’s Article 6.4 is the next iteration. The Myanmar project’s co-benefits (improving health, sustaining forests, empowering women) are welcome — but they should be directly funded as development aid not as emission offsets. Why does reducing indoor concentrations of real pollutants with adverse respiratory health effects such as soot, oxides of sulphur and nitrogen, etc. need a ‘decarbonisation’ narrative when the two are completely unrelated? Indeed, rather than subsidising more efficient woodstoves as in the Myanmar project, wouldn’t cooking stoves that do away altogether with traditional biomass — such as pressurised LPG cannisters — be a superior alternative?

Friedrich von Hayek famously observed that the “the curious task of economics is to demonstrate to men how little they really know about what they imagine they can design”. In its fatal conceit, the climate industrial complex imagines that it can design a global carbon market that cuts emissions, transfers wealth equitably and preserves industrial competitiveness. History, economics and the CDM operational record say otherwise.

Dr Tilak K. Doshi is the Daily Sceptic‘s Energy Editor. He is an economist, a member of the CO₂ Coalition and a former contributor to Forbes. Follow him on Substack and X.