OPPORTUNITIES IN CLEAN DEVELOPMENT MECHANISM (CDM)
Pakistan has the great potential for CDM projects in agricultural biomass, livestock, forestry, wind, hydro, solar, waste management, cement, steel and textile sectors.
By Dr. Aman Ullah Chaudhry
Aug 08 - 14, 2005
The 1992 United Nations Framework on Climate Change (UNFCCC), although not fully satisfactory, was important for developing countries. It recognized the need for their development and the need to reduce greenhouse gas emissions. Subsequently, there is no question about the scale of impact the Kyoto protocol has had since it was negotiated for two-and-a-half years and finally adopted in Kyoto in December 1997. The third session of the Conference of Parties (COP3) of UNFCCC was perhaps one of the largest international environment agreements of the century. The decision of the United States to withdraw from the Kyoto protocol in March 2001 stirred up the entire process of negotiations, especially since it is the largest emitter of greenhouse gases (36 percent of global emission). The downstream impact of the Kyoto Protocol is that the market for carbon credits has shrunk since the largest potential buyer left the table.
The complexity of the negotiations, however, meant that considerable "unfinished business" remained even after the Kyoto protocol itself was adopted. The protocol stretched out the basic features of its "mechanisms" and compliance system, for example, but did not flash out the all-important rules of how they would operate. Although 84 countries signed the protocol, indicating that they intended to ratify, many were reluctant to actually do so and the protocol into force before having a clearer picture of the treaty's rulebook. A new round of negotiations was therefore launched to flash out the Kyoto protocol rulebook, conducted in parallel with negotiations on ongoing issues under the convention. This round finally culminated at COP7 with the adoption of the Marrakesh Accords, setting out detailed rules for the implementation of the Kyoto protocol.
The 1997 Kyoto protocol shared the convention's objective, principles and institutions, but significantly strengthens the convention by committing Annex I parties to individual legally-binding targets to limit or reduce their greenhouse gas emissions. Parties to the convention that have also become parties to the protocol, however (that is, by ratifying, accepting, approving or according to it) will be bound by the protocol's commitments. The individual targets for Annex I parties are listed in the Kyoto protocol's Annex B. These add up to a total cut in greenhouse gas emissions of at least 5 percent from 1990 levels in the commitment period 2008-2012. The Kyoto protocol broke new ground by defining three innovative "flexibility mechanisms" to lower the overall costs of achieving its emissions targets. These are joint implementations, international trading and CDM. These mechanisms enable parties to access cost effective opportunities to reduce emissions or to remove carbon from the atmosphere in other countries. While the cost of limiting emission varies considerably from region to region, the benefit for the atmosphere is the same, where ever action is taken
The protocol entered into force on the 19th day after the date on which not less than 55 parties to the convention, incorporating Annex I parties which accounted in total for at least 55 percent of the total carbon dioxide emissions for 1990 from that group, have deposited their instruments of ratification, acceptance, approval or accession. As of 29th April 2005, 150 states and regional economic integration organizations have deposited instruments of ratifications, accessions, approvals or acceptances.
Pakistan has ratified the Kyoto protocol and submitted the instrument of accession to the UN on January 11, 2005.
The Kyoto protocol, which has finally come into being after about seven years of intense international negotiations, holds out immense possibilities for Pakistan. As Pakistan is not required to reduce emission of greenhouse gases under the protocol, which basically is a mandate for only acknowledged "industrialized", and thus highly polluting nations, the country could well be one of the largest beneficiaries in terms of dollars.
The protocol brings into force a clean development mechanism (CDM) wherein developed nations - so-called "Annex I" countries - will be able to trade part of their commitment of reducing greenhouse gases by buying green energy credits, called certified emission reductions (CERS), from projects in developing countries like Pakistan - non - Annex I countries - that do not have their own Kyoto emission targets.
Adopted in Kyoto, Japan, in December 1997, this protocol of the United Nations Framework Convention on climate change puts binding commitments on 36 developed countries (the industrialized countries and the countries with economies in transition) to reduce their overall greenhouse gas emissions, individually or jointly, by at least 5 percent below 1990 levels in the first commitment period of 2008-2012. These countries account for about 30 percent of total carbon emission.
Consequently, carbon has become a tradable commodity. One ton of carbondioxide reduced through a CDM project, when certified by a designated entity, becomes a tradable CER. Revenues from CERS can form part of a project's annual cash flow, equity or debit. The protocol, therefore, paves the way for an entirely new form of international commerce by way of carbon trading. Many believe that the emerging business revolving around the trading of harmful gas emission reduction credits will be much bigger than most other commodities on the market today.
CDM PROJECTS IN OTHER COUNTRIES
India has developed more CDM methodologies and project proposals than any other country, says a study by the UN Conference on Trade and Development (UNTCD). India has emerged as the largest supplier of projects. Industry sources estimate that around 150 CDM project documents have been designed in India, of which over 50 projects have been cleared by government. Some of these have finalized carbon credit sale deals with international buyers and many are in advanced stages of validation and registration with UNFCCC. CDM project development in India is facilitated largely by consultants and funded by private sector itself. Some projects have also been developed with donors, such as Canada, Germany, Japan, the United Kingdom, the World Bank, and the European Union. Among the projects selected under Annex I government tenders and carbon funds, the largest number of projects are from India. Indian CDM investors expect a good portion of the carbon trading dollars to flow into the country. It is expected that between now and 2012, there would be a reduction of 2.5 billion tons of carbon emissions. India is expected to contribute 850 million tons of this. At the current rate of US$ 6 per ton, that's a lot of money.
India stands to pocket quite a bit of global green bucks resulting from carbon trading. India's share of the international CDM market, as estimated by the national strategy study - a World Bank project for CDM implementation in India - could be at least 10 percent, earning revenue of up to $ 100 millions per year. This position of India is largely due to a combination of a few factors, such as enhanced awareness among stakeholders, increased private sector engagement, streamlined national approval procedures and the presence of several international donor-supported CDM activities. Further a strong human resource base and service sector make the country an ideal host for CDM projects. In terms of technologies, the Indian CDM project portfolio is currently dominated by small-scales projects, mainly from renewable energy sector. As early as August 2003 the Indian government forwarded six CDM projects to UNFCCC Executive Board. Of these three were wind power projects and three were biomass projects using agricultural waste to generate power. The biomass based projects were (begasse cogeneration power plant, Karnataka; Tamil Nadu biomass project (cotton stalks, rice husks etc.) and credit purchaser is Swedish Energy Agency; Biomass project Maharashtra and Kalpataru Biomass project (three biomass plants, on mustard crop residues). India thinks that she has the highest number of industry sectors that have adopted methods to reduce carbon emissions in the atmosphere by using non-fossil fuel. These range from cement, steel, biomass power, begasse cogeneration, and municipal solid waste to energy and municipal water pumping to natural gas power.
CDM POTENTIAL IN PAKISTAN
Pakistan has got a lot of opportunities. The potential is there for the wind, hydro, solar, waste management, biomass (bagasse) cogeneration in sugar mills, biomass (cotton stalks, rice husks, oil seed crop residues, methane emission capture from livestock sector, cement, steel and energy efficiency in textile industry.
It is suggested that Pakistan should learn how to play the CDM game in order to secure better deals. The process of attracting CDM projects should start and pick up steam. Workshops should be held to build awareness and capacity in support of project preparation and there should be considerable interest among policy making bodies, the business community in the public and private sectors, NGOs as well as universities and research institutions.
In order to make sure that even the few projects undertaken under the CDM promote sustainable development, Pakistan needs to set up domestic institutions and build capacities to vet, approve and monitor projects. This needs to be done in a way that does not create bureaucratic bottlenecks and hurdles that discourage projects.
The biggest benefit for a country like Pakistan does not lie in financial gains that the protocol brings in its wake. A much bigger intangible benefit is that it will allow an additional source of revenue for clean energy projects that were not viable earlier. Now it will make business sense for investors to put in their money in clean energy projects like biomass, cogeneration, renewable energy, recycling of municipal waste for power generation and other such projects.
Clean energy technologies, such as wind, biomass or waste utilization face major commercialization challenges because of their comparatively higher development costs. Yet they provide the same service - electricity - provided by other technologies, and do so at a higher cost to the user. The Kyoto protocol and CDM provide us with a tool to reward the performance of clean energy technologies.
The author is from Department of Agronomy, University of Agriculture, Faisalabad. e-mail:firstname.lastname@example.org