UN's carbon role questioned as $200 million cash pile sits idle
The U.N. body tasked with channelling hundreds of billions of dollars to cutting emissions is under growing scrutiny as its once booming investment program dries up, leaving most of its funds unspent while other climate initiatives are short of cash.
The Kyoto Protocol's Clean Development Mechanism (CDM) has helped funnel almost $400 billion into emission-cutting projects in developing countries by allowing investors to earn carbon credits they can sell to companies and governments of richer nations that use them to meet emission targets.
From 2003, developers flocked to register projects such as destroying heat-trapping waste gases at Chinese chemical plants or installing hydroelectric power stations in Brazil, and made huge profits by selling the resulting carbon credits for up to 22 euros ($30.40) a tonne in 2008.
But interest has waned while countries wrangled over setting new emission goals under the United Nation's Framework Convention on Climate Change (UNFCCC), hammering credit prices down to unprofitable levels below 0.20 euros.
The board appointed to oversee the CDM insists work should continue to improve the system to ensure it is ready when demand returns, yet analysts and governments see almost no prospect of a price recovery until 2020, when a new UNFCCC deal is due.
"We hope countries will come forward with ambitious reduction pledges but at the moment it is hard to see where demand for international offsets will come from (post-2020)," said Jacob Werksman, a senior official at the European Commission who negotiates on behalf of EU nations at U.N. talks.
The latest U.N. financial statements show the CDM has operating cash of $148 million, on top of a separate reserve of $45 million, meaning the system's administrators could continue at current levels almost until the end of the decade.
But with such a bleak outlook, some observers are calling on the CDM to drastically scale back its Bonn-based operations and want much of its near-$200 million of cash pile spent elsewhere.
"Having staff sit in Bonn and slowly draw down the surplus in salary is not a good use of these human and financial resources," said Anne Arquit Niederberger, a consultant who has worked on CDM projects and was a Swiss negotiator at U.N. climate talks when the mechanism was drawn up in the 1990s.
The CDM raises funds by charging fees to developers for registering projects and issuing credits, a relatively unique mechanism which helped it grow from a handful of staff in 2003 to more than 160 in 2013 as the number of projects mounted.