Michael Richardson, For The Straits Times 19 Apr 10;
A HYDROPOWER dam in the Himalayan mountain country of Bhutan has just been registered as the first cross-border project in a United Nations programme to encourage developing nations to reduce carbon emissions.
Known as the Clean Development Mechanism (CDM), the programme allows government and private sector investors to develop clean energy projects in poorer nations to earn certified emission reduction (CER) credits - each equivalent to one tonne of carbon dioxide.
These CERs can be traded and sold, and used by industrialised economies to meet a part of their emission reduction targets under the Kyoto Protocol climate change treaty. Developing countries are not bound to make similar cuts.
Although the protocol is due to expire in 2012 and negotiations on a follow-on framework are mired in contention, supporters of the CDM see it as a way of demonstrating that developed and developing nations have a common interest in working together to achieve sustainable development. This, they say, could help encourage agreement on a new international framework to limit climate change.
The US$200 million (S$275 million) Dagachhu dam in Bhutan, financed by loans from the Asian Development Bank, Japan and Austria, is expected to reduce CO2 emissions by about 500,000 tonnes per year, largely through export of power to India, which relies heavily on coal-fired plants for its electricity generation.
The 114MW project will earn income for Bhutan's state-owned utility, which says royalties from the project will enable it to supply low-cost electricity to rural domestic customers while providing the government with a long-term revenue stream to alleviate poverty.
This first cross-border project under the CDM to encourage regional trade in renewable energy follows registration in January of the UN scheme's 2,000th project - a biogas extraction and distribution venture in Thailand's Sakaeo province that will reduce CO2 emissions by more than 56,000 tonnes annually.
The first CDM project was registered with the UN certification authority in November 2004. It took almost 31/2 years for the first 1,000 projects to be approved, and less than two years for the next 1,000, ranging from wind and solar power to waste handling and reforestation. With 450 projects now being considered for final approval by the CDM executive board and more than 2,000 additional ventures being assessed, it is hoped the 3,000 mark will be reached in an even shorter time.
The secretariat in Bonn, Germany, of the UN Framework Convention on Climate Change, the parent treaty of the Kyoto Protocol, expects the CDM to save more than 2.7 billion tonnes of CO2 from being spewed into the atmosphere in the five years to 2012.
CDM projects are designed to ensure measureable and verifiable emission reductions. But in a scheme that yields tradeable credits worth billions of dollars, there have been abuses. Much of the preliminary auditing of CDM projects is done by private firms. The UN recently suspended two of them for procedural breaches, bringing to four the total number removed from the scheme in 15 months.
Some governments, too, have been lax in supervising CDM schemes. So far, despite efforts to encourage other developing regions to take advantage of the programme, the CDM has been dominated by Asia, chiefly China and India.
An independent review of the UN secretariat supporting the CDM highlighted the need for reform. The review, released in December, found that while demand for the CDM was rising fast, the proportion of projects registered without the need for corrections had dropped from 80 per cent to 30 per cent in four years.
As a result of the need for more careful checks to ensure that projects delivered the promised environmental benefits, registration times tripled in two years to an average of 200 days, substantially increasing costs and the workload of the over-stretched secretariat. The review concluded that while project quality had been restored, the CDM process needed to be better coordinated.
This effort is now underway. It includes allowing developers to put up similar small-scale clean-energy projects in a single programme for registration to cut expensive auditing fees. Swiss firm South Pole Carbon says it recently received the first letter of approval from the Indonesian government to bundle dozens of small hydropower projects for formal UN registration next year. Submitting each of the Indonesian projects singly would have been time-consuming and costly.
The UN says it already has 40 bundled CDM projects being processed. The moves to accelerate registration offer South-east Asia the chance to increase its share in the clean energy scheme, which currently stands at just 231 of the 2,141 approved ventures. Only eight of the 10 Asean member states have registered CDM projects, with Malaysia, Indonesia, the Philippines, Thailand and Vietnam the most active so far.
The CDM is the first global environmental investment and credit scheme of its kind. If it is to be a trailblazer for a new global climate change framework, it must produce broadly based benefits and credible emission reductions.
The writer is a visiting senior research fellow at the Institute of South East Asian Studies.
