A General Accounting Office (GAO) report entitled, "International Climate Change Programs: Lessons Learned from the European Union's Emissions Trading Scheme and the Kyoto Protocol's Clean Development Mechanism," concludes that the program was compromised because 1) the CO2 cap was estimated to be higher than actual emissions (thus causing the price of carbon offsets to collapse) and 2) it is difficult to determine whether the projects that industrialized nations funded in developing countries would have happened anyway. President Bush and the U.S. Senate opted out of the Kyoto Protocol because they did not believe it would work in the USA.
The GAO report recommendations include:
1) In deliberating legislation intended to limit greenhouse gas emissions that would employ a cap-and-trade system or allow the use of carbon offset programs such as the Clean Development Mechanism, Congress may wish to consider the lessons identified to help ensure that it develops policies that achieve the intended results in a cost-effective manner.
2) Specifically, Congress may wish to consider the following lessons from the ETS: (1) the importance of ensuring the availability and reliability of historic emissions data, with an accuracy compatible with the program's point of regulation, from entities that will be affected by the regulatory scheme prior to its establishment; (2) the importance of long-term certainty in encouraging investments in low-carbon technologies; and (3) the importance of understanding how the means of distributing allowances to emit greenhouse gases--such as free allocation versus auctioning--may create and redistribute substantial wealth.
3) Specifically, Congress may wish to consider the follwing lessons from the CDM: (1) that it may be possible to achieve the CDM's sustainable development goals and emissions cuts in developing countries more directly and cost-effectively through a means other than the existing mechanism; (2) that the use of carbon offsets in a cap-and-trade system can undermine the system's integrity, given that it is not possible to ensure that every credit represents a real, measurable, and long-term reduction in emissions; and (3) that while proposed reforms may significantly improve the CDM's effectiveness, carbon offsets involve fundamental tradeoffs and may not be a reliable long-term approach to climate change mitigation.
GAO Report Summary (html)
GAO Full Report (pdf)
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