(Just for fun, rest assure that the carbon credits from CDM projects are not earned in the above manner.)

The Clean Development Mechanism (CDM) was discussed in our previous article. We are encouraged by the interest and participation of China and India in the CDM projects. However, the other Asian countries are still not making full use of the CDM to get funding and technology to reduce their emissions. Some information that we obtained from the Carbon Forum Asia 2007 is shown below.

The UNFCCC CDM website reported that there are 844 registered projects and 53 requesting registration, and more than 2600 projects in the pipeline. Of the registered projects, 61% is implemented in Asia and the Pacific (34% is implemented in India, 16% in China, 2% each in Malaysia and Korea). The expected average annual CERs from the registered projects amount to about 174,268,851 and 45% is generated by China while India generates 16%. Together, India and China takes up 50% of the CDM registered projects and generates 61% of the annual CERs.

The UNEP Risoe Centre reported that for the other 2600 projects in the pipeline, 73% is in Asia and the Pacific. The number of CDM projects in Asia by country are as follows: China (44%); India (40%); Malaysia (4%); Indonesia (3%); Philippines (2%); South Korea (2%); Thailand (2%); Vietnam (1%); Sri Lanka (1%) and Others (1%). The expected volume of CERs until 2012 in Asia is generated mostly from China (66%) and India (19%).

The above figures show that China and India host most of the CDM projects in Asia and the world, and most of the CERs is expected to be from China. The other countries in Asia are still lacking behind in the CDM market and some speakers attribute it to the lack of knowledge and awareness of CDM among the governments and private companies, and also the lack of financial support. Those countries can learn from China, especially on China’s role in CDM and carbon trading, and on how China use the profits generated for tackling climate change.

Source: UNFCCC CDM website; UNEP Risoe Centre; China.org.cn; Xinhua News Agency. Image attribution: WillyFeng.

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We attended the recent Carbon Forum Asia 2007, which has given us more knowledge about the carbon market and how carbon trading works. In particular, we realised that the Clean Development Mechanism (CDM) works and is useful in helping developing countries reduce their carbon emissions through the use of cleaner and better technology.

Background

Under the Kyoto Protocol, developed countries (Annex I countries) are required to reduce their greenhouse gas emissions below specific target levels, between 2008 and 2012. To give developed countries some flexibility in meeting their targets and for developing countries (non-Annex I countries) to benefit from investment and technology in carbon-reducing projects, the Protocol developed three flexibility mechanisms. They include:

1. Clean Development Mechanism (CDM): this mechanism provides for Annex I countries to implement projects that reduce emissions in non-Annex I countries, in return for certified emission reductions (CERs) that can help meet their emissions targets.
2. Joint Implementation (JI): this mechanism provides for an Annex I country to implement an emission-reducing project or a project that enhances removals by sinks in another Annex I country, and use the resulting emission reduction units (ERUs) to meet its own target.
3. Emissions Trading: this mechanism provides for Annex I countries to purchase units from other Annex I countries and use them to meet their targets.

Developed countries are required to take domestic actions (”significant element”) to reduce their own emissions and the use of the mechanisms should be “supplemental to domestic action”. In other words, carbon trading should not be used as a shortcut way to meet emissions targets.

Clean Development Mechanism (CDM) 

Currently, the CDM is the favoured mechanism to earn CERs or commonly known as carbon credits. These CERs are traded in the global carbon market with ready buyers and sellers. The CDM works and some speakers at the Carbon Forum called it a success story. A typical CDM project undergoes the following:

• The project developer undertakes a CDM project in a developing country (host country).
• The project must satisfy two criteria - additionality and sustainable development. Additionality means that the project must have reduced emissions in addition to those that would occur in the absence of the project. The project must also help the host country move towards sustainable development and this criteria is determined by the host country.
• The project developer describes the project details in the Project Design Document (PDD) based on approved methodology by the CDM Executive Board (EB).
• The host country appoints a Designated National Authority (DNA) to approve the CDM project.
• The PDD and approval from the DNA is submitted to a Designated Operational Entity (DOE) who is approved by the EB to conduct the validation of the proposed project.
• After validation, the DOE submits the PDD to the EB for approval and registration.
• After registration, the project developer implements the CDM project according to the PDD and monitors the emissions.
• The DOE verifies the emissions from the project and requests the EB to issue the CERs.

Most of the CDM projects deal with hydropower, biomass energy, renewable energy and energy efficiency. The UNFCCC CDM website reported that there are 844 registered projects and 53 requesting registration, and more than 2,600 projects in the pipeline. The expected average annual CERs from the registered projects amount to about 174,268,851. This means that the implementation of the CDM projects have reduced emissions in developing countries by about 174 million tonnes of carbon dioxide equivalent.

Source: UNFCCC CDM website.

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