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The Kyoto mechanism of 1997 Kyoto Protocol broke new ground with its three innovative options: Joint Implementation, the Clean Development Mechanism (CDM) and Emissions Trading. These aim to maximize the cost effectiveness of climate change mitigation by allowing parties to pursue opportunities to cut emission, or enhance carbon sink, more cheaply. The cost of curbing emissions varies considerably from region to region as a result of difference in, for example, energy sources, energy efficiency and waste management. It therefore makes sense to cut emission, or increase removals, where it is cheapest to do so, given that the impact on the atmosphere is the same.
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| The Clean Development Mechanism (CDM) is one of the `flexibility mechanisms' authorised in the Kyoto Protocol. This specified legally binding commitments by most industrialised countries to reduce their collective greenhouse gas (GHG) emissions by at least 5 per cent compared to 1990 levels before 2008-2012. The United Nations Framework Convention on Climate Change (UNFCCC) recognises that the CDM "should be oriented towards improving the quality of life of the very poor from the environmental and social standpoint, and creating opportunities for the private sector of the host country party". The CDM generates credits from sustainable developmental projects that can be used by developed countries to meet their Kyoto Protocol commitments. |
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| Under the CDM, an industrialised country with a GHG reduction target can invest in a project in a developing country without a target, and claim credit for the emissions that the project achieves. For example, an industrialised country may invest in a wind power project in a developing country that replaces electricity that would otherwise have been produced from coal. The industrialised country can then claim credit for the emissions that have been avoided, and use these credits to meet its own target. For industrialised countries, this greatly reduces the cost of meeting the reduction commitments that they agreed to under the Kyoto Protocol |
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| Developing countries on their part have to: |
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Set up the institutional arrangement for implementing CDM. |
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Define the project criteria, which would include the `sustainable development' criteria. |
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| In order to execute a CDM project, it is essential to establish that by implementing it there will be a reduction in emissions. Among all the greenhouse gases, carbon dioxide is the most significant, in terms of importance and quantity emitted. Under the CDM, a legal entity invests in a project that reduces emissions in a non-Annex. 1 (developing countries) party. Once certified, these Certified Emission Reductions (CERs) can be used to meet Annex. 1 (industrialised countries) commitments under the Kyoto Protocol. The emission reductions must be "additional to any that would occur in the absence of the certified project activity". The CERs can be owned only after the projects and the emission reductions have been endorsed, measured, audited/verified, and certified. The CERs could then be banked for use in the first commitment period or transacted in an international market. |
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| The two major risks that may arise with respect to the CERs generated are: |
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Non-achievement of the CERs in an activity. |
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Overestimation of the reduction units, intentionally or otherwise, by the parties involved. |
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| Effective monitoring and verification mechanisms need to be set up to provide safeguards against deliberate inflation of baselines and errors in reporting. |
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| Power Sector has good potential for CDM and the reduction of carbon-dioxide emissions. While developing new technologies to achieve the CERs (Certified Emission Reductions), it is important that they are cost-effective, efficient and do not add any burden to the consumer. Although a number of improvements have been implemented in the conventional fuel sectors, it is becoming increasingly necessary to look at alternative energy resources. India has over half a million villages that require electricity for basic activities. Decentralised power generation systems are of considerable interest for village settlements, remote small industries, and irrigation. RETs (renewable energy technologies) may be preferred by CDM projects in remote and decentralised locations. |
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| It is important to recognise the potential of the CDM in targeting local environmental and development issues, even as it addresses the challenge of climate change. It is, therefore, essential that host countries assess the sustainable development benefits of the CDM projects to ensure consistency with their own developmental goals. |
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| The CDM can be effectively used by the developing countries to: |
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Promote alternative energy projects. |
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Develop local economies by promoting distributed generation which will encourage self-sufficiency in the rural communities, and eliminate the cross-social subsidies that the urban and industrial consumers bear. |
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Promote new and efficient technologies in infrastructure industries such as cement, electricity and steel by actively promoting optimal use of resources such as waste heat and low-heat boilers. |
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Promote municipal solid waste processing projects, which have become critical in maintaining the social and environmental equilibrium in urban areas. |
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| For More Information: |
www.cdm.unfccc.int
www.teri.org |
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