Abuse and incompetence in fight against global warming Up to 20% of carbon savings in doubt as monitoring firms criticised by UN body Nick Davies Saturday June 2, 2007 The Guardian Smoke billows from a factory on the outskirts of Shenyang, in China's Liaoning province. Photograph: Sheng Li/Reuters A Guardian investigation has found evidence of serious irregularities at the heart of the process the world is relying on to control global warming. The Clean Development Mechanism (CDM), which is supposed to offset greenhouse gases emitted in the developed world by selling carbon credits from elsewhere, has been contaminated by gross incompetence, rule-breaking and possible fraud by companies in the developing world, according to UN paperwork, an unpublished expert report and alarming feedback from projects on the ground. Article continues One senior figure suggested there may be faults with up to 20% of the carbon credits - known as certified emissions reductions - already sold. Since these are used by European governments and corporations to justify increases in emissions, the effect is that in some cases malpractice at the CDM has added to the net amount of greenhouse gas in the atmosphere. The problems focus on the specialist companies that validate and verify the projects in the developing world which produce the certified emission reductions. Three of those companies have failed spot checks, which revealed a catalogue of weakness. Separately, one of the CDM's experts calculates that as many as one third of the projects registered in India are commercial ventures which do not produce any additional cut in greenhouse gases and were wrongly approved. There are only 17 of these validating and verifying companies. Most of them have a clean track record and will have approved reliable emissions reductions, but three of them have been performing so poorly that the CDM's executive board ordered spot checks - and all three companies failed on multiple grounds. The findings on one company, which is believed to have validated dozens of projects and verified millions of tonnes of carbon reductions, were so bad that the board considered suspending its right to work. The chairman of the CDM board, Danish energy consultant Hans Jürgen Stehr, insisted that in the end the problem was not bad enough to require any of the companies to be suspended. However, he said: "This has been serious. We are talking about competence and the ability of the company to do a proper job." He ruled that none of the three companies be named. In the formal language of the UN, the minutes record findings for each of the three companies variously of "non-conformities regarding...its competencies to perform validation and verification functions, its quality assurance and quality control mechanisms and compliance with the CDM requirements...procedural and operational requirements, such as its management and operational structure, contract control...and compliance with its own stipulated procedures." The board has called for a new regime of surveillance of their work. One source who has been working closely with the CDM board had seen some companies filing reports with "all kinds of basic errors which make you wonder if they have any idea what they're doing". They included an entire report in a foreign language when basic rules require it to be in English; submitting a report containing remarks such as "we must check this before we submit the report". Other errors are said to be more serious, including conjuring up numbers when projects on the ground failed to provide them; giving a green light to commercial projects which make no contribution to reducing greenhouse gases; and approving existing projects which cannot claim to be part of the drive to cut emissions. Most of the concern is around the crucial CDM test of "additionality" - proof that a project is delivering cuts in greenhouse gases that would not otherwise have happened. In an unpublished report, one of the CDM board's expert advisers, Axel Michaelowa, examined all 52 Indian projects which had been registered up to May 2006 and found that a third of them failed this additionality test. Mr Michaelowa found evidence of projects supplying false information which was then accepted by the companies who were supposed to check it. In one case cited in the report, he accuses an Indian company of making statements which were "blatantly false". Despite his protests, that scheme was approved. · Additional reporting by David Adam Interactive guides Global warming The slowdown of the Gulf Stream Special reports Special report: climate change Special report: G8 Useful links IPCC UN framework convention on climate change