Accounting for Carbon Offsets

Highly complex, difficult to value assets are being evaluated by a handful of firms with strong ties to the financial corporations whose job it is to market those assets to investors around the world.  Sound familiar?

It's not mortgages but carbon offsets and not only are the issues related many of the same players are involved. Harpers has a good piece (subs, try also here (pdf)) with more details than I have seen elsewhere on how the market works.  It's not all bad, as the author, Mark Schapiro shows, the measurement infrastructure that has been created is actually quite impressive, but not enough effort has been put into monitoring.  Here's one good bit:

In this highly specialized new industry, perhaps
a thousand people really understand how
onsite measurement of CDM projects works,
and there is a serious potential for conflicts of
interest. It is not uncommon for validators and
verifiers to cross over to the far more lucrative
business of developing carbon projects themselves–
and then requesting audits from their
former colleagues. Schneider points out that
young university graduates entering the field
commonly spend several years learning the
ropes at DOEs and then “go to work for a carbon
project developer, where they make three
times the salary doing more interesting work.”

These developers–which partner with local
businesses and governments to set up offset projects–
are by and large funded or owned outright
by multinational firms, particularly financial
houses such as JP Morgan Chase, which owns
the biggest developer in the world, Eco-Securities; Goldman Sachs, which has a significant interest in the largest U.S.-based developer,
Blue Source; and Cantor Fitzgerald, which owns
CantorCO2e, another major player….


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