DNV suggests CDM improvements

2008-11-11

Mumbai: DNV, a key player in the Clean Development Mechanism (CDM) market with a global market share of close to 50%, proposes improvements to the trading system. DNV has a strong base in India and handles the validation of close to 40% of the 360 projects currently being executed in the country. Print this page Save as PDF E-mail link

India has been an early mover in the CDM arena and is still one of the major host countries for CDM projects. DNV now suggests how the CDM system should be further developed in order to both increase the number of projects and improve the quality of the quota trading system.

The CDM system has been operational for close to 5 years, and weaknesses in the system have gradually become more evident. This includes the concept of additionality and that the system is perceived as being bureaucratic and expensive. Based on its wide experience with the system, DNV propose that it must be simplified if more climate projects are to be carried out in developing countries.

One of the changes DNV suggests relates to renewable energy. Hydropower is disputed as a CDM measure because it is difficult to know with certainty whether the projects would have been carried out in any case or whether it is the extra revenues from quota sales that contribute to this. DNV believes it is difficult to find out exactly which hydropower projects would have been carried out in any case. Instead of evaluating each individual project, DNV is therefore proposing a new approach. Based on historical trends, prevailing policies and economic conditions, a forecast can be prepared of what the growth in hydropower would be without the CDM system. Any increase in hydropower in excess of this estimated trend can be rewarded by the allocation of climate quotas.

Energy efficiency enhancement has also been problematic in the CDM system. Measures to save energy are often profitable even without revenues from climate quotas. They are therefore usually not approved as CDM measures. Nevertheless, they are often not implemented for various reasons. Instead of evaluating each individual project’s energy savings, DNV suggests starting off with, for example, the 20% most energy efficient companies in a sector. Measures which produce better energy efficiency than that achieved by these companies can be allocated climate quotas.

DNV is sceptical to including measures to protect the rainforest in the CDM system, believing there is too great a risk that protecting one area will simply lead to more trees being cut down in another.

However, DNV is very interested in including the removal of CO2 from coal-fired power plant emissions, which is not currently approved as a CDM measure. DNV believes the CDM system may significantly help to bring about such removal in developing countries.

DNV also suggests a more efficient system for approving climate projects. Today, each individual project is approved by a UN board. This is a bottleneck in the system. DNV believes the board should concentrate on creating rules and framework conditions and leave the assessment of individual projects to DNV and other approved companies. DNV believes the UN board can take random samples to check that these companies are doing a proper job.

The system involving climate trading with developing countries is still in the start-up phase. DNV emphesises that the CDM mechanism is an important tool in fighting global warming, but that there is room for improvements.

About Clean Development Mechanism CDM

The Kyoto Protocol allowed industrialised countries to invest in climate measures in developing countries instead of cutting their own emissions. This is called CDM.

DNV was in 2004 one of the first companies to be accredited by the Kyoto Protocol’s CDM Executive Board to validate greenhouse gas emissions reductions from projects in the developing world. In the ensuing years DNV has undertaken validation and verification of close to 50% of more than the 1,000 registered CDM projects. CDM projects have so far generated more than 135 million certified emission reductions (CERs). The mechanism is currently anticipated to generate more than 2.7 billion CERs in the Kyoto Protocol’s first commitment period.

DNV handles the validation of close to 40% of the 360 projects currently being executed in India. The company’s role is to check projects before they are approved by the UN. All CDM projects must be checked by such an independent company both before and after they are carried out.

The DNV team was responsible for the validation of the landmark energy efficiency project in Andhra Pradesh, which became the 1000th CDM project to be registered. The project is expected to reduce CO2 emissions by more than 34,000 tonnes annually. Other key projects in India include validation of two Wind Farm Projects in Chitradurga, Karnataka and in Jaisalmer, Rajasthan for Enercon Ltd., validation of a project Comprising Changing Mode of Transport from Roadways to Railways for Hindustan Lever Ltd. in Assam, as well as several key projects for clients such as ITC Bhadrachalam, Oswal Mills and several biomass based power projects in various parts of the country.

DNV has developed methodologies to secure transparent, reliable and credible audit results, and is accredited under both the Californian Climate Action Registry and the Chicago Climate Exchange in the US, in addition to the UK Emissions Trading Scheme. DNV has over 200 trained climate change auditors worldwide, with technical expertise and a local presence.

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