Climategate: How to follow the money

“On paper” is the key here. In reality, Wayne alone used to be emitting 1,000 tons of carbon. Now, Wayne and Wang together are emitting 1,500 tons in total. Wayne is out $1,020 for the CER, Wang is $980 richer, and Al has made $40.

On paper, it’s a reduction of 500 tons of CO2 emissions, but it’s only a real reduction if Wang really would otherwise have built a power plant to emit 1,000 tons. But because Wang knows he can make money on the CERs, that is going to factor into his decision to build a power plant at all — all the incentives in Wang’s case are to build more power plants and emit more CO2, as long as he can convince someone (in this case a UN organization) that he “really would have built the power plants anyway.”