Wikileaks confirms Indian projects are non-additional

[Paryavaran Mitra]

Wikileaks and the CDM


Last week Wikileaks released a cable the American Consulate in Mumbai
sent to the Secretary of State in July 2008 summarizing a meeting that
the Consulate's Office and the US Governmental Accountability Office
(GAO) had with Indian industrialists regarding their views and
experience with the CDM.

The cable is a goldmine - it provides clear evidence that non-
additional projects (those that do not provide real emission
reductions) are being supported.



And even better, the statements come directly from the horses' mouths
- project developers, a former head of the CDM Executive Board,
project auditors, financiers and CEOs of major Indian industrial
companies.

Below I pick out some juicy quotes to peak your interest. While no
explanation is really needed, I offer my interpretation. Check out my
blog next week for a more elaborate analysis of the cable and the
various issues that it touches on.



Have fun and be prepared to be shocked at how candid CDM participants
are about the need to game the system.

SUBJECT: CARBON CREDITS SUFFICIENT BUT NOT NECESSARY FOR
SUSTAININGCLEAN ENERGY PROJECTS OF MAJOR INDIAN BUSINESS GROUPS

Translation: Most clean energy projects in India are not additional -
i.e. they could be realized even without the extra financing from
carbon credits.

However, they [carbon credit boosters] conceded that no Indian
project could meet the "additionality in investment criteria" to be
eligible for carbon credits.



Translation: The CDM is unncessary - these projects are happening
anyways.

[Somak Ghosh, President of Corporate Finance & Development Banking at
Yes Bank], pointed out that no bank would finance a project which is
viable only with carbon revenues because of the uncertainty of the
registration process, unclear guidelines on qualifying CDM projects
and because carbon revenue is only a by-product revenuestream of the
main operations of the company.

Translation: Banks don't finance truly additional projects, since the
risks with the CDM registration process are too high.

He [Ghosh] admitted that project developers prepare two balance sheets
to secure funding: one showing the viability of the project without
the CDM benefit (which is what the bank looks at) and another
demonstrating the non-viability of the project without the CDM
benefit.

Translation: Lie if you want the sugar coating of the carbon credits
from the CDM.

At a seminar on CDM in Mumbai, R K Sethi, Member Secretary of the
[Indian] National CDM Authority and the present Chairman of the CDM
Executive Board, publicly admitted that the National CDM Authority
takes the "project developer at his word" for clearing the
"additionality" barriers.

Translation: Concoct a convincing story that your project is
additional and I'll believe you. Note: Sethi is no longer on the Board
- his term has expired.


Mathsy Kutty [of Det Norske Veritas (DNV), a CDM Executive Board-
accredited
validation and verification organization for CDM projects], is
concerned that [Ultra Mega Power Plant] (UMPP) Project will be
rejected by the CDM Executive Board, as the use of supercritical
technology in all UMPPs is a mandatory requirement stipulated by the
Indian government. As this technology is the norm for all UMPPs, it
has to be put in place by the project developer with or without the
CDM benefit. Proving additionality is therefore difficult, she
continued. (Comment: Ironically, DNV acted as the validator for the
Mundra UMPP and, as per Patkar, has already validated the project.
End Comment.)

Translation: Since the project developer pays the validator to
recommend the project to the CDM EB, it is no surprise that often
validations are positive, even when the projects are clearly not
additional. No wonder DNV was the first CDM auditor to besuspended by
the CDM Executive Board. The CDM provides perverse incentives for
developing countries to not enact more stringent environmental
standards.



[Shishir] Tamotia, [CEO of Ispat Energy which is owned by the brother
of steel magnate Lakshmi Mittal], complained of increased scrutiny of
projects both by the CDM Executive Board and by validators. He also
pointed out that validators "overdo it and raise unnecessary
objections to try and makethings perfect".

Translation: Just believe our claims - there is no need to do a check.



[Pamposh] Bhat, [Director for Climate Change at GTZ], urged companies
to think of
"innovative" ways to qualify CDM projects.

Translation: If you try hard enough you'll find a way make your
project look additional.

High energy prices and the cheap supply of equipment from China are
making CDM projects viable without the CDM credit, [Tamotia] said.


[Ram] Babu, [the Managing Director of CantorCO2e's operations in India
(a global project and emission trading consultant)] said that CDM
benefit is a bonus and noted that most of the projects are implemented
even before being registered to earn carbon credits. Excluding
"business as usual" projects from qualifying is "killing" Indian
projects, he added.


B Agarwalla, the Executive Director of Tata Power, argued that all
measures resulting in improved energy efficiency should be eligible
for carbon credits, even if they are adopted to enhance profitability.



Translation: It is in our financial interest to become more efficient.
The CDM is not a motivator and our projects are viable without the
CDM. But it sure is nice to get a subsidy we don't need. And who cares
if crediting non-additional projects actually allows the CDM to
increase global emissions.