UN program to fight global warming is target of criticism
HOUXINQIU, China: The wind turbines towering above this dusty village at the hilly edge of Inner Mongolia could be an environmentalist's dream: Their electricity is clean, sparing the horizon a buildup of sooty clouds or global warming gases.
But the wind turbines are also part of a growing dispute involving a United Nations program that is the centerpiece of international efforts to help developing countries fight global warming.
That program, the Clean Development Mechanism, has become a kind of Robin Hood, raising billions of dollars from rich countries and giving them to poor countries to curb emissions of global warming gases. But the biggest beneficiary is no longer so poor: China, with $1.2 trillion in foreign exchange reserves, got three-fifths of the money raised last year.
Scientists are increasingly worried about emissions from developing countries. China is expected to pass the United States this year or next to become the world's largest emitter of global warming gases. New research suggests that global warming may melt the polar ice cap sooner than expected, leading to a faster rise in sea levels and other problems. That puts a spotlight on the Clean Development Mechanism, which has grown from less than $100 million in payments to developing countries in 2002 to $4.8 billion last year.
Its growth has come almost entirely by focusing on projects in China and several other fast-growing countries, while poorer countries have received almost nothing. And that is why the program is becoming a battleground, pitting an unlikely coalition of bankers, traders, industrialists and environmentalists, who defend it, against economic development advocates, who warn of distortions.
China captured $3.2 billion of that $4.8 billion in subsidies last year for dozens of projects, according to the World Bank, though it accounted for less than two-fifths of the developing world's fossil fuel consumption, the main source of global warming gases.
One of the projects is the wind farm in Houxinqiu, nestled between a pine-forested hill and a blue lake fringed by broad fields tilled into long furrows of freshly planted wheat. It is profitable even without the subsidies and is owned by a group of Chinese companies traded on the Shanghai stock exchange.
But it is precisely the financial sophistication of China that has helped it soak up most of the money. A vigorous cottage industry of project designers and brokers has sprung up in Shanghai, with workers translating forms into Chinese, promoting the program and streamlining steps to make it easy and inexpensive for Chinese companies to participate in the program.
"There are a lot of people who know how to do it," said Tao Fuchang, the general manager and chief engineer of the Liaoning Zhangwu Jinshan Wind Power Electricity Company, which built and operates the Houxinqiu wind turbines.
Next in line are India, Brazil, Mexico and Argentina, which grab most of the rest of the subsidies, together with South Korea, which was incongruously classified as a developing country by the Kyoto Protocol, the 1997 pact to limit emissions that also led to the creation of the Clean Development Mechanism.
Trailing far behind is Africa. Payments totaled less than $150 million last year for all the countries in Africa, where governments complained that they have been largely left out of one of the biggest bonanzas for the developing world in many years.
"We see this problem everywhere in Africa," said Sateeaved Seebaluck, the permanent secretary for the environment in Mauritius, an island chain off the east coast of Africa.
Even when very poor countries are able to organize Clean Development Mechanism projects, they lack local expertise and must sometimes surrender as much as half the credits in the form of fees for international consultants and credit brokers, who are heavily concentrated in high-cost London.
UN executives respond, with considerable support from environmentalists, bankers and corporations, that the program's primary task is to reduce the tonnage of carbon dioxide and other global warming gases entering the atmosphere - regardless of where it comes from. By that measure, they say, the program is a success.
Kai-Uwe Schmidt, the Clean Development Mechanism executive board secretary in Bonn, Germany, said that the organization was very aware of regional imbalances in global warming projects and hoped to address them. But setting up an emissions-reduction project often requires considerable investment.
"We do not see many investments flowing into Africa in the first place," Schmidt said.
Subsidies are readily available for everything from straw-fired power plants to the capture and burning of methane leaking from landfills. Though detailed procedures already have been developed for projects in China and other fast-growing countries, they can be easily copied for use in any developing country.
But before manufacturers can obtain the subsidies, their national governments need to set up their own local legal frameworks for handling the money, which some of the world's poorest countries have not yet been able to do.
The projects that have so far produced the greatest number of credits involve attaching waste gas incinerators to chemical factories that manufacture an ozone-destroying air conditioner refrigerant known as HCFC-22; these chemical factories are found almost exclusively in the more prosperous developing countries.Kristalina Georgieva, the director of sustainable development strategy and operations at the World Bank, said that the Clean Development Mechanism secretariat could and should simplify its rules to help poorer countries.
Currently, the program requires certification that emissions reductions have actually taken place in poor countries.
Georgieva also argues that the secretariat should pay more attention to fostering renewable energy in very poor countries, because 1.6 billion people in poor countries lack any electricity and it is crucial to choose technologies for them that will contribute as little as possible to global warming.
"How the developing countries choose to electrify will determine the fate of the Earth," she said during a recent speech.
But too much streamlining of the verification process could undermine the confidence of investors in rich countries that the credits are genuine, she acknowledged in an interview.
"What you may get is eroding trust in the system," she said.
David Doniger, a former Clinton administration environmental official who participated in many of the Kyoto Protocol drafting meetings in 1997 that led to the creation of the Clean Development Mechanism, said that questions had been raised then about whether very poor countries would be able to obtain credits.
But the negotiators decided against any system for guaranteeing a division of credits by region, preferring a system focused on reducing emissions wherever they might occur.
"Those were rejected on the grounds that you wanted to get more bang for the buck and they didn't want this to turn into another UN institution with a lot of emphasis on regional balance," said Doniger, who is now the climate policy director at the Natural Resources Defense Council.
The wind turbine project in Houxinqiu, an impoverished area of China, shows the pluses and minuses of the Clean Development Mechanism.
While Tao was very reluctant to discuss the company finances, Clean Development Mechanism records show that the wind farm saved the equivalent of 35,119 tons of carbon dioxide emissions a year. At $8 a credit, that is worth $281,000 a year. Tao does not rely on that money to make the project viable, as the subsidies aim to do, but it helps him pay for more turbines.
"Without the Clean Development Mechanism, we'd still be profitable," Tao said, but added, "You need the CDM for further expansion."