Clean Development Mechanism

The United Nation’s Kyoto Protocol established Binding greenhouse gas emissions reductions targets for 37 industrialized Countries and and European Community to achieve the targets, the protocol introduces three “flex able mechanism “ International Emissions Trading (IET), Joint Implementation (JI). And the clean Development Mechanism (CDM).

The clean Development Mechanism (CDM) has been the most successful of the three flex able Mechanism. It has tow main Goals : one assist Countries without emissions targets (i.e. Developing countries ) in achieving sustainable development. Tow, help those countries with emissions targets reduction under Kyoto protocol (i.e. Developed countries ) In achieving compliance by allowing theme purchase offset created by (CDM) Projects. A Board arrange of projects are eligible for CDM accreditation, with notable exception of nuclear power and avoided deforestation projects. They very from hydropower and wind energy projects to fuel switching and industrial efficiency improvements Crucially.

To qualify for accreditation the project develops must prove ‘additionally’ defined emissions reductions that are additional to what would have occurred otherwise this is calculated by using approved methodology to subtracts the estimated emissions of a given project from hypothetical ‘business-as-usual’ emission baseline.

Once Registered project are then issued Certified Emissions Reductions (CER), with each CER unit equal to a reduction of one tone of carbon dioxide equivalent. These CER or offsets can be bought and used by Developed countries to meet there Kyoto commitments.

Companies can also purchase CERs to contribute toward there own emissions reduction targets under mandatory trading schemes or voluntary schemes.

There are Currently over 3000 registered project delivering an average 500 Million CERs per year. The overwhelming demands for CERs comes from the emissions trading schemes (ETS), the world’s largest functioning compliance carbon company market. Between 2008 and 2010 European companies 227 Millions CERs to meet there emissions reduction targets under this mechanism. Carbon has become the tradable commodity.

Consequently under taken to improve energy efficiency or renewable energy systems qualify carbon trading. The annual revenue generated would be a part of financial benefits of the system and can be included in the calculation of annual savings. Thus the equation of annual savings can be modified as follows Annual Savings = savings of fuel and electricity – Repayment on loan taken for system – ( Maintenance charge , local taxed, etc ) + tax Deduction + Savings Under CDM.

CDM project are not without there controversies however. Questions surround sustainable development credentials projects. Particularly in the case of industrial gas projects. HFC-23 projects, for example seem to create perverse incentives to continue to produce the ozone depleting gas HCFC-22 in order to destroy waste gas by products HFC-23.

Indeed in response to this starting in May 2013, the EU has banned companies covered by the EU Emissions trading Schemes from using CERs from HFC-23 and N20 adipic acid industrial gas projects . it cited concerns regarding the en environmental merits, cost effectiveness and competitive distortions of these projects.