Isramart : CDM crackdown continues as board rejects fresh Chinese wind projects

Isramart news:
The panel in charge of the UN's carbon offsetting scheme the Clean Development Mechanism (CDM) has again rejected applications from a number of wind energy projects as it seeks to bolster confidence in the controversial scheme.

The CDM, which works by allowing emission reduction projects in developing countries to sell carbon credits, has been widely criticised by green groups for approving projects such as wind farms and clean coal plants that would have gone ahead anyway without the extra revenue generated by selling certified emission reduction (CER) credits.

The CDM's Executive Board appeared to respond to the criticism late last year, rejecting applications from 10 Chinese wind farms on the grounds that they could operate profitably without the right to issue CERs. The decision followed concerns that officials in Beijing had reduced their own incentives for wind farms as a result of the support developers were receiving through the CDM.

The affair took another twist late last week when the latest meeting of the Executive Board said that it had mistakenly included two wind farms in the list of rejected applications that should have been approved.

However, in a sign that the apparent crackdown on projects that fail to meet so-called additionality criteria is continuing, the board approved 32 Chinese wind farms for inclusion in the CDM but blocked a further six projects from entering the scheme.

Five of the six rejected projects were in the province of Heilongjiang, and according to project operators they would have generated 2.1 million CERs by 2012. According to Reuters reports, the projects' investors included US investment bank Goldman Sachs, Japanese government agency NEDO, Dutch firm Essent Energy Trading and UK-based Climate Change Capital.

The move is likely to further anger carbon traders and investors, who last year criticised the CDM in a report from the International Emission Trading Association (IETA) which warned the CDM was "buckling under the weight of its own success" and called on the UN to expand the body managing the scheme.

The group's calls for an increase in resources to manage the CDM will have also been further fuelled by the Executive Board's admission late last week that a number of key policy issues, including methodologies for assessing emission from grid power and proposals to streamline registration processes for projects were not completed due to "time constraints".
David Lunsford, policy leader for emissions trading at IETA, said that the group welcomed the fact that that the number of project approvals and corrections from the board "show there are no generic concerns about the important Chinese wind sector".

But he raised concerns that "the precise reasons for the rejection of six particular projects over additionality in the light of applicable tariff structures remain obscure, and it is a pity discussion of a working paper on these additionality assessment issues was postponed to the EB's next meeting". He added that without greater clarity over which projects are eligible for CDM approval "investors will continue to discount for unmanageable regulatory risk, and fewer emissions reductions will be achieved".

The board did however make progress on a number of fronts, agreeing to make it easier for projects to enter the CDM by deferring registration fees for projects in countries with fewer than 10 registered projects and approving a new methodology for measuring emission reductions that should make it easier for biomass power plants to gain CDM approval.

The Executive Board also announced that it has appointed Clifford Mahlung, an applied meteorologist in the National Meteorological Service of Jamaica, as its new chairman.

Mahlung said that the main focus of the board over the coming year would be to "fully engage with and draw from CDM stakeholders" in order to enhance the quality and efficiency of the scheme and provide greater transparency around the board's decisions.