Establishing additionality: fraud vulnerabilities in the clean development mechanism
Abstract
Purpose: This study explores the Clean Development Mechanism (CDM) which creates carbon credits from emission abatement projects in developing economies. The purpose of this paper is 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 ...
View more >Purpose: This study explores the Clean Development Mechanism (CDM) which creates carbon credits from emission abatement projects in developing economies. The purpose of this paper is 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.
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View more >Purpose: This study explores the Clean Development Mechanism (CDM) which creates carbon credits from emission abatement projects in developing economies. The purpose of this paper is 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.
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Journal Title
Accounting Research Journal
Volume
23
Issue
3
Copyright Statement
© 2010 Emerald. This is the author-manuscript version of this paper. Reproduced in accordance with the copyright policy of the publisher. Please refer to the journal's website for access to the definitive, published version.
Subject
Accounting, auditing and accountability
Banking, finance and investment
Finance
Criminology not elsewhere classified