66 MAKALE/ ARTICLE The most attractive CDM host country, according to a poll CDM ISSUES AND CHALLENGES conducted by Point Carbon, is China.7 With its large and The CDM faces a number of key issues. Arguably, the last-growing economy, it is becoming increasingly attractive to greatest challenges will arise because project investment CDM investors. i t has established a government-led group on must be carried out in developing countries. the CDM and has signaled its willingness to ratify the Kyoto Protocol. These factors have made it attractive to several Such countries may lack the appropriate policy and Annex I countries including the Netherlands, Germany, and investment climate for effective CDM development. in Switzerland. addition, project approval from governments may be difficult lndia also has significant CDM project potential. Table 1 highlights the opportunity in the power sector. Although lndia has great project potential, is one of the world's fastest-growing and most energy-intensive developing economies, and has a 10% renewable energy target for 2012, its approach towards the CDM has been ambivalent. This is partly because the price for CDM credits is currently low, around $3-5/tonne, and at this level, few potential projects in lndia are deemed sufficiently attractive. Brazil has ratified the Kyoto Protocol and its CDM awareness is high. A number of CDM project proposals are being developed, some of which are in the sugar cane bagasse cogeneration sector. DE/CDM EXPERIENCE While no CDM projects have today been formally approved, nor can they have value until the Protocol is ratified, interest in the mechanism is growing rapidly. The two main initiatives driving are: OThe Dutch Government CERUPT program: in March 2003, the Dutch Government approved 18 emissions reduction projects in developing countries, aiming to cut carbon dioxide emissions by over 16 million tons. The Netherlands will buy these reductions and use them to meet part of its own reduction commitments.8 This program is unlikely to issue further tenders and the Dutch Government has diversified its means of securing credits by linking with initiatives led by, for example, the lnternational Finance Corporation and Rabobank. The sister ERUPT program provides funds for JI projects. in May 20003, it was announced that 17 projects were being invited to submit full proposals for crediting as a response to a second cali for tenders. Credits are priced at around $5/ton. OThe Prototype Carbon fund (PCF): The PCF invests its shareholder funds in CDM projects.9 Shareholders receive a proportion of the emission reductions, verified and certified in accordance with agreements reached with the respective countries hosting the projects. PCF credits are priced at around $3/ton or more. in addition to these two groundbreaking initiatives, there are growing numbers of conventional applications to the CDM EB for baseline methodology and project approvaı.10 ENERJi & KOJENERASYON DüNYASI to secure and CDM capacity may be immature. Furthermore, as can be seen in Figure 1, the project approval process is not necessarily fast or straightforward. The need tor project bundling DE projects tend to be small by their very nature. Transaction costs therefore tend to be high and can be prohibitive for many projects. Allied with the fact that market prices for carbon credits and permits are likely to remain low, there is real concern that the CDM and other credit-generating schemes may be of little, if any, benefit to DE project developers. Many institutions, including the PCF, have concluded that emerging emissions credit markets will not favor small countries. The EB's fast-tracking procedures may help to an extent, but effective project bundling will almost certainly be necessary to enable sufficient small projects to proceed. Even if bundling is enabled, however, certain key criteria will need to be fulfilled to increase project revenues derived from credits:11 O A high volume of combined credits O At least 10% of overall project revenues should be derived from credits O National CDM capacity frameworks should be well developed O A single donor or investor O Common elements for baseline standardization. Carbon prices -too low for DE? Estimates for future world carbon prices vary widely, but most assume low values during the Kyoto commitment period during 2008-2012. The price of $5/tC02 is frequently used as an 'up-side' benchmark, and is usually not exceeded. Developers and financiers making assumptions above this level may be exposing themselves to undue risk. At these low price levels, smaller DE projects may derive little financial benefit, though some marginal deals may become bankable. Carbon finance might provide up to 10% of project financing debt for wind projects and up to 25% for bagasse projects. For crop waste-to-energy projects and methane recovery projects, carbon credit values can range between 50-100% of project financing debt. in the latter case, this is because of the relatively high impact of methane as a greenhouse gas. For these more specific projects, a small minority of potential DE schemes, credit payments can be used to amortize a commercial loan.
RkJQdWJsaXNoZXIy MTcyMTY=