Audit firms that make sure emission-reduction projects obey rules of the 1997 Kyoto Protocol may stop accepting jobs on Jan. 1 because of surging risks associated with their work, according to a lobby group.
Some auditors may “consider not requesting any further registration or issuance of projects for at least some categories as long as they consider themselves exposed to a non-acceptable risk,” according to a report e-mailed today by the Designated Operational Entities and Independent Entities Association in Geneva.
The Clean Development Mechanism executive board has asked United Nations climate envoys in Doha, Qatar, to approve rules that require so-called DOEs to buy and retire emission credits in the market should regulators decide the firms’ work included “significant” deficiencies, the lobby group said. Those rules could damage an audit firm’s financial position while there are no insurance products available, it said.
The association said UN envoys should consider requiring some nations participating in emission-reduction projects to accept the risk of replacing excess credits, according to the report.
Alternatively, the executive board could identify a cap on the total liability, which may enable development of insurance products, the group said.
The CDM auditors make sure each project obeys market rules derived from the UN-overseen protocol, which has targets for industrialized countries through this year. They include SGS SA, Det Norske Veritas Ltd., Tuev Sued and Bureau Veritas SA.
The EU has said it’s willing to extend the protocol.