Linking the CDM with domestic carbon markets

Purpose – Since the registration of the first clean development mechanism (CDM) project in 2004, the CDM has seen a dynamic expansion: the CDM pipeline currently comprises 6,725 projects generating 2.73 billion certified emission reductions (CERs) up to 2012. These CERs result in a substantial financial flow from Annex I to Non-Annex I countries. But CDM projects also result in investments in low carbon technologies, a substantial share of which is focused on the energy sector. The total installed capacity of all CDM projects amounts to 288,944 MW. However, the CDM is not widely taken up in Africa. This holds true for Africa's share in the CDM project pipeline (2.62 per cent), for Africa's share in CERs generated up to 2012 (3.58 per cent) and for the normalized CERs per capita, per country. Two hypothesizes are commonly discussed: first, the continent features low per capita emissions and low abatement potentials. Second, African countries may be hampered by weak institutional frameworks. This article reviews both hypotheses and presents new empirical data. The paper aims to discuss these issues. Design/methodology/approach – Investigating the greenhouse gas (GHS) abatement potential of 16 energy-related sectors for 11 selected least developed countries in sub-Saharan Africa shows a total theoretical CDM potential of 128.6 million CERs per year. Analyzing investment indicators confirms that most countries are impeded by below average investment conditions. Findings – It is concluded that Africa offers a considerable range of substantial abatement potentials. However, the weak institutional framework is limiting the uptake of the CDM in Africa. This is underpinned by an analysis which shows if a CDM sector has high investment cost, Africa will have a low share in the sector. If the sector has low investment needs per CER, Africa's share in the CDM sector will be bigger. Investment needs and Africa's share in the pipeline feature a negative correlation. Research limitations/implications – Supporting CDM development in Africa should not be constraint to technical assistance. It will be crucial to develop an integrated financing approach, comprising the CDM as a co-financing mechanism, to overcome the institutional challenges. Originality/value – Until today, there are few empirical studies that use concrete criteria and indicators to show why the CDM is underrepresented in Africa. The work presented here contributes to filling this gap.

CDM potential in the power-generation and energy-intensive industries of China

The relationships between CDM project characteristics and CER market prices

This paper explores the existing trading mechanisms for Certified Emission Reductions (CERs), a tradable commodity generated under Clean Development Mechanisms (CDM) of the Kyoto Protocol and proposes an electronic trading system to improve the trading efficiency and the liquidity of the commodity in Sri Lanka. Currently, thirty-five CDM projects are under way in Sri Lanka and most of these projects are power generation plants based on renewable energy sources. Even though most of these projects are financially viable, they would not have been implemented in the absence of additional financial benefits generated by selling CERs due to various reasons including long pay back period, high initial cash outflows and other uncertainties attributed to this industrial sector. These private companies are finding it difficult to attract funding for CERs at a reasonable price compared to market value of substitute products. The existing negotiation process is lengthy and complex and there are many other deviations from perfect market conditions applicable to these trading mechanisms. Due to these reasons, the liquidity of CERs is very low and there is very high price volatility. The average price obtained by local CDM projects for CERs is considerably less than the current market price of substitute carbon products. There are several well-established carbon emission markets in the USA and Europe that facilitates trading of these various different carbon emission products but such a system is not available for trading of CERs in Sri Lanka. Due to the low liquidity of CERs (current price per tonne of CER around 4-8 US$) and many other reasons, only a very small fraction of the potential CDM capacity in Sri Lanka is considered for actual implementation up to now. To avoid these problems and to obtain maximum possible financial benefits from the Kyoto Protocol, an electronic trading system is proposed in this paper to facilitate trading of CERs.

Time to market in the CDM: variation over project characteristics and time

Modeling the Price Spread between the EUA and the CER Carbon Prices

Carbon markets devolve governance to external institutions and displace power from sovereign states. Major producers in these markets, notably China, have expressed concern about the adverse implications for national interests and sovereignty associated with selling off the rights to emit carbon emissions abroad. This article suggests that such concern has shaped the discursive context in which emission trading schemes have gained popularity in the country. Our discourse analysis shows that notions of market power are made manifest as a powerful storyline. In the Chinese language, “power,” “sovereignty,” and “rights” all use the same character. The storyline captures all these expressions and allows for a positive view about active engagement in carbon trading as a way to protect development rights and redeem carbon sovereignty. Thus, the contested policy of emissions trading becomes embedded in the more appealing narrative of national development and made politically attractive, despite unfavorable realities against it.

Clean development mechanism projects and portfolio risks

China is the second largest emitter of greenhouse gases (GHG) in the world, with potentially about two thirds of total Certified Emission Reductions (CERs) for Asia on the world carbon market (Gruetter, 2002). Since 68% of its primary energy is from coal, China's average energy intensity is 7.5 times higher than the EU and 4.3 times higher than the US (EU, 2003). Therefore, introducing advanced clean technologies and management to China represents opportunities for Annex I countries to obtain low-cost CERs through CDM projects, and access to one of the largest potential energy conservation markets in the world. CDM can provide a win-win solution for both China and Annex I countries, and the Chinese government considers that the introduction of CDM projects can bring advanced energy technologies and foreign investment to China, thereby helping China's sustainable economy and generating CERs. As energy efficiency is generally low and carbon intensity is high in both China's energy supply and demand sectors, numerous options exist for cost-effective energy conservation and GHG mitigation with CDM. This paper reviews current Chinese policies and administrative and institutional settings for CDM cooperation, and discusses existing policy, institutional and other barriers in the energy market by drawing on observations and experience from previous initiatives such as Cleaner Production and energy efficiency. Some options to remove these barriers are addressed. In order to make CDM projects feasible, China's government needs to promote awareness, streamline administrative systems, and be more active in building a competitive edge in the world carbon market.

Clean development mechanism (CDM) is encountering many uncertainties due to the coming end of the commitment period and critically suggested reformation. As the largest participant in the CDM market, China shoulders the biggest proportion of market risk. Among the studies on CDM in China, few have focused upon the legal aspect of CDM, which is crucial in defending developers' interests. To fill this research gap in making the transition from policy to law, this paper claims that carbon emission right, which is the basis of trade, should be attributed as a property right in Property Law of People's Republic of China. The present study will discuss the characteristics of carbon emission, definition, and legal attribution of carbon emission right. The valid object of carbon emission right in the CDM market under Property Law should be certified emis- sions reductions (CERs). The usufructuary right could be specifically applied in practice to the owners' property right on CERs in China. Although experience from the CDM is not fully applicable to the development of cap and trading, the success of CDM market provides a reasonable platform to study emission right in the view of legal science. Furthermore, the proposed research acts as the pioneer study that lay the theoretical foundations in legal science on emission right trading for other potential schemes, which in turn addresses international environmental issues.

CDM’s influence on technology transfers: A study of the implemented clean development mechanism projects in China

Examining the impacts of Feed-in-Tariff and the Clean Development Mechanism on Korea's renewable energy projects through comparative investment analysis

The social shaping of technology : Donald MacKenzie and Judy Wajcman (eds.), (Open University Press, London, 1985) pp. 326, £20 (£9.95 paperback)

The discussion about Clean Development Mechanism (CDM) Projects has its roots in global warming and its consequences. CDM projects enable developed countries to offset the pollution generated by the acquisition of Certified Emission Reductions (CER), concerning the reduction of Greenhouse Gases (GHG) emissions in developing countries. The article discusses the CDM in a comprehensive manner, based on the opinion of experts, and investigates the future of this market from 2012, the post-Kyoto period. The main results show that the CDM follows the principles of Sustainable Development, focusing on the climate changes and the profitability of projects. It shows that Brazil has real possibilities to act in the CER market which is expected to consolidate in the post-Kyoto. Controversial issues as the future of post-Kyoto, nuclear power and especially the conservation of forests, through the generation of CER, remain undefined.

. The purpose of Clean Development Mechanism (CDM) is to reduce the emission of greenhouse gas through carbon credit. The mechanism allows projects or business enterprises related to the reduction of carbon emission in developing countries to receive the Certified Emission Reduction (CER). The current research uses the qualitative approach and analyzes policies on Value-Added Taxes (PPN) and the Income Tax (PPh) to determine the ones appropriate for CER transactions in Indonesia. India’s policies of PPN and PPh on CER transactions are used as a benchmark to analyze tax policies on CER transactions in Indonesia. The current research shows that, in regard to PPN taxable objects, CER is the equivalent of a marketable security or collateral. Article 4 Clause (2) Point d in UU PPN Indonesia states that marketable securities are categorized as non-taxable goods; therefore, in accordance with UU PPN, a CER transaction is exempt from PPN. PPh laws and regulations state that the income from CER sales in Indonesia is subject to the income tax. To support the policy on carbon emission reduction, the government can issue a policy in which PPN is not levied on imported machines or equipments used in technology transfer activities, and thus facilitate the growth of CDM projects. Keywords : certified emission reduction (CER), clean development mechanism (CDM), income tax, value-added taxes