Establishing additionality: fraud vulnerabilities in the clean development mechanism

Abstract

Purpose

The purpose of this paper is to explore the clean development mechanism (CDM) which creates carbon credits from emission abatement projects in developing economies. The paper aims to examine the operation of the CDM with specific reference to fraud vulnerabilities regarding the additionality of a project. An examination of the process of establishment, certification and verification of additionality (confirmation that emissions post‐implementation of the CDM project are lower than those that would have occurred under the most plausible alternative scenario) is used to highlight the need for particular vigilance in respect to sustaining and improving the integrity of future market‐based mechanisms post‐Kyoto.

Design/methodology/approach

The study takes a case study approach, examining the CDM project cycle and associated key entities.

Findings

The study posits that the processes associated with establishing and verifying additionality of a project are potentially key areas of systemic weakness that must be addressed. This case study explores the design features of the CDM that may afford greater opportunities for fraudulent or deceptive practices.

Originality/value

The CDM takes a project‐by‐project approach to establishment, verification and certification of additionality. Whilst conceptually this design may be appropriate from an operational perspective, it potentially provides opportunities for fraudulent outcomes. The individualised approach is, by its very nature, highly resource‐intensive and inherently difficult to verify.

Citation

Drew, J.M. and Drew, M.E. (2010), "Establishing additionality: fraud vulnerabilities in the clean development mechanism", Accounting Research Journal, Vol. 23 No. 3, pp. 243-253. https://doi.org/10.1108/10309611011092574