Additionality in carbon offsets: Evidence from Clean Development Mechanism projects in India

Résumé

A key component of the growing number of carbon markets around the world is the use of offsetting mechanisms, which allow trading off domestic with foreign emissions reductions, thereby improving cost-efficiency. However, a key condition for the integrity of any carbon market is that emission reductions represented by offsets are additional, i.e., that these emission reductions would not have occurred in the absence of the crediting mechanism. We assess the additionality of the world’s largest supplier of carbon emission reduction offsets, the Clean Development Mechanism (CDM), using a unique dataset covering the population of wind farms in India, of which half of them are registered as CDM projects. We establish the non-additionality of 42% of CDM projects and cannot find a single unambiguously additional CDM project. In addition, the probability of being registered with the CDM increases with the project's profitability. This suggests that the CDM is doing the exact opposite of its objective function - supporting projects that would have existed anyway. We conclude that there is significant scope for improvement to the monitoring and enforcement protocols in place to assess additionality, and that such improvements should be considered a necessary condition if offsetting mechanisms are to have a future within global emissions reduction efforts. Joint with Jonathan Colmer, Caterina Gennaioli, Matthieu Glachant, Anna Schröder.