Vulnerability of CDM projects for discontinuation of mitigation activities (SB46)
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Thomas Day from NewClimate Institute presented findings from the report "Vulnerability of CDM projects for discontinuation of mitigation activities" during an official side-event at the 2017 Bonn Climate Change Conference. The report report looks at the vulnerability of CDM projects for discontinuation, as well as exploring options to support continued mitigation.
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Vulnerability of CDM projects for discontinuation of mitigation activities (SB46)
- 1. SB46 Side-Event: From CDM to international climate finance: Ensuring continuity of mitigation action Vulnerability of CDM projects for discontinuation of mitigation activities Thomas Day Bonn, 11 May 2017
- 2. Report release today 211/05/2017 Project executed by: NewClimate Institute Öko-Institut Lambert Schneider Supported by the German Emissions Trading Authority (DEHSt) Download: newclimate.org/publications
- 3. Main research questions 311/05/2017 1. Which CDM projects are most at risk of discontinuing mitigation? 2. What is the potential mitigation impact from supporting vulnerable projects? 3. What options exist for supporting vulnerable projects?
- 5. Assessing project vulnerability 511/05/2017 Low – medium risk Variable risk / potentially high Coal mine methane EE Industry EE own generation EE supply side Forests Fossil fuel switch Geothermal Hydro Solar Wind Biomass Household energy efficiency Fugitive HFCs Landfill gas Methane avoidance N2O PFCs+SF6
- 6. Vulnerability: Methane avoidance 611/05/2017 Mitigation potential for manure management ca. 2 MtCO2e in each country, and replicable in non-CDM activities.
- 7. Support options: manure management 711/05/2017 Support options should consider: Limited capacities at the farm level Small-scale capital for motor replacements Difficulties with connecting to the grid Unavailability of the original 3rd party project operators
- 8. Vulnerability: Biomass energy 811/05/2017 Mitigation potential is uncertain, dependant on availability of biomass.
- 9. Support options: biomass energy 911/05/2017 Support options should consider: High price of biomass Volatility of market supply
- 10. Vulnerability: Household energy efficiency 1011/05/2017 Mitigation potential for cook stoves up to ca. 1.2 MtCO2e in India and Kenya combined, but this potential is uncertain. Very high replicability: emissions from wood fuels worldwide are approx. 1.2 GtCO2e
- 11. Support options: cook stoves 1111/05/2017 Support options should consider: No incentives for project owner to participate Households cannot afford clean stoves Awareness on optimal usage limited amongst households Cultural preferences for traditional methods
- 12. Summary and conclusions 1211/05/2017 Observations: risk and mitigation impact of continuation • Projects with 3rd party ownership/participation generally at higher risk • Projects without revenues or cost savings remain highly dependant on carbon finance: limited transition to long term independence • The discontinuation scenario of vulnerable projects is not always the same as the project baseline scenario: mitigation impact of continuation should be assessed carefully for each project type
- 13. Summary and conclusions 1311/05/2017 Observations: support options Enhanced CER demand (intl. purchase facilities / domestic market instruments) • Can positively impact projects through increasing financial benefits and stimulating re-engagement of third party project participants. • Sometimes found to have only potential for short term impact; limited long- term removal of non-financial barriers after carbon finance is withdrawn. • Not all project types face the same barriers as they did at project conception; restored CER finance should not be expected to remove the barriers for all vulnerable project types. Domestic policies / programmes (unilateral or with support e.g. NAMAs) • High potential for long-term barrier removal for all project types assessed. • Pilot sector-level crediting mechanisms may offer an appropriate channel for supporting a policy / programme oriented approach driven at the sector level.
- 14. Contact details: Thank you for your attention! www.newclimate.org Thomas Day t.day@newclimate.org Publications available under newclimate.org/publications
- 16. 11/05/2017 www.newclimate.org 16 Shortlisted project types
- 17. 11/05/2017 www.newclimate.org 17 Shortlisted countries
Editor's Notes
- Commercial livestock manure management projects are known to have faced considerable difficulties in Mexico and Brazil due to third party ownership issues, resulting in at least 88% and 58% of projects in these countries, respectively, being already dismantled. The remaining projects are mostly likely to have had the same fate, whilst the farms where technologies are installed are at a high risk of discontinuing, if they have not done so already. All manure management projects in Thailand utilise biogas for electricity and do not face the same barriers regarding ownership structures and capacities for technology operation as projects in Mexico or Brazil, and as such are considered low risk. Wastewater projects are understood to be at low risk of discontinuation in India, Thailand and Malaysia due to the high benefits of biogas utilisation, and the recent availability of grid connectivity in these countries. The risk of project discontinuation for composting projects in Malaysia is identified as uncertain, due the variability of conditions. Although many projects are likely to continue, there is considerably uncertainty due to changeable local market conditions and the immaturity of the EBF compost market, and many projects are understood to be in the process of dismantling.
- Bagasse energy in the sugar industry is a low risk activity in both India and Brazil due to the highly positive economic conditions from the sale of electricity to the grid. Biomass IPP projects are generally at high risk of discontinuation in India, where biomass prices are relatively high and the biomass supply chain is unreliable. The risk of projects in Thailand is comparatively lower, due to more favourable conditions for the price and availability of biomass for projects. Projects using biomass for captive energy generation in India are generally considered to have a high risk of discontinuation, since the price of biomass as well as the unreliability of the supply chain favour a switch to coal fired energy generation in most cases.
- Lighting projects are considered to be at low risk of discontinuation in Mexico, India and Pakistan. In Mexico, regulations require the continuation of the project. In India and Pakistan, it is determined that households are likely to finance replacement of bulbs due to their increasing market presence, the decreasing costs and improving knowledge on their benefits. Cook stove projects are considered to have a high risk of discontinuation in India and Kenya. Regulations do not require the continuation of the use of efficient stoves in both countries. Project owners have no incentive to continue financing replacement stoves and households are highly unlikely to finance this due to the considerable costs and other barriers including knowledge of benefits and cultural preferences.