According to Business Green, the United Nations suspended its third carbon credit auditing company in 15 months. Essentially, the auditors failed to follow protocols for confirming that carbon offset projects actually provide the environmental gains they promise:
The executive board in charge of the Clean Development Mechanism (CDM) last week suspended Germany's TUEV SUED and also partially suspended Korea Energy Management Corporation, after spot checks undertaken at their offices revealed procedural breaches.
Why do we care? In order for an effective carbon regulation scheme, the carbon offset program has to be measurable and verifiable. To do so, there needs to be auditors confirming that the projects are valid.
On the one hand, the suspensions are a positive sign because they indicate that the UN is maintaining some sort of oversight over the auditors, on the other hand, it is distressing that three of the companies which have been charged with verification have been suspended, including TUEV SUED, "the second largest CDM validator" which "had approved 1,147 renewable energy projects – almost one fifth of the total – by the end of February this year" according to Business Green.
As the United States builds its GHG regulatory scheme, it needs to take into consideration how to ensure that the guards of environmental validity are properly guarded--that auditing procedures and confirmation of the validity of the audits is build robustly into the system. Nothing will erode the credibility of a cap-and-trade system faster than discovering that the carbon offsets at the base of the market are fraudulent.