CDM must work to promote low-carbon energy

REEEP position: classify all renewable energy and energy efficiency technology projects additional

There is little dispute that the Clean Development Mechanism (CDM) is in urgent need of reform. The entire concept of additionality, where a project must show that it yields an outcome that would not otherwise have happened, is flawed when applied to low carbon energy technologies such as renewables and energy efficiency.

The first shortfall is that other than for small-scale projects, additionality is currently limited to demonstrating  financial additionality.  This theoretical construct does not work at the current low price levels for Certified Emission Reductions (CERs).  The whole system was initially designed for a market where the expected demand and prices would be much higher.

Furthermore, the current approach for measuring additionality based on benchmarks is not suitable for either renewable energy or energy efficiency projects. For energy efficiency projects, the rates of return of generally very high even without CERs, but they are still not realised, and the current additionality tool does not work.

In the recent case relating to wind projects in China, the Executive Board (EB) of CDM seems to be micromanaging additionality for renewable energy very selectively and without consistency.  Industry observers agree. “We believe that this approach indicates the EB has not correctly understood the situation and the decision was not taken transparently” says Li Junfeng, President of the Chinese Renewable Energy Industry Association “and it sets and alarming precedent.”

Binu Parthan, Deputy Director General of REEEP says “REEEP believes that the project-by-project determination of additionality in the current CDM procedures for clean energy technologies does not have the intended effect. REEEP calls on those responsible to categorise all renewable energy and energy efficiency technologies as additional, i.e. to pre-determine additionality at the technology level. Only if a host country reaches a sunset threshold of 10% or 20% of energy provided from a specific renewable energy technology such as wind (a similar threshold was defined for ultra-supercritical coal), should CoP/MoP be able to categorise future projects applying these technologies as no longer additional.”