Carbon Market Watch

For fair and effective climate protection.

Coal update: CDM EB fails to address non-additionality and over-crediting (Newsletter #16)

11 Sep 2011

Going against the recommendation of the Methodology Panel the CDM Executive Board did not suspend the flawed methodology for coal projects (ACM0013) during its last meeting. Furthermore, CDM Watch’s  analysis shows that coal projects in India and China are not additional. These new coal plants could potentially generate hundreds of millions of artificial credits while emitting billions of tones of CO2.

At its last meeting the CDM Executive Board refused to suspend the coal methodology (ACM0013) despite evidence presented by the Methodology Panel that current CDM crediting rules create significant over-crediting. The Panel showed that current rules allow plant operators to use outdated information to determine baseline emissions that ignores the efficiency improvements of new fossil fuel-fired power plants over time[1].

If a project is non-additional in the first place, then none of the credits it earns are representing real emission reductions. The problem is made worse if the project can claim credits based on a flawed methodology that inflates the baseline emissions, allowing it to earn more credits than if the baseline was calculated correctly.

Suspending the methodology would have put new registration requests on ice until a revised methodology, free of such flaws, could be approved. Not putting the methodology on hold despite the concerns raised by the Methodology Panel has given project developers an incentive to speed up their validations and registration requests in case the methodology is revised and made more stringent. Note that project developers are already in a rush to get their projects registered before the end of 2012 because projects registered after 2012 have to be located in Least Developed Countries in order to sell their credits into the EU-ETS, which is by far the largest buyer of CERs.

It is vital that the methodology is suspended as soon as possible, so that the flaws can be rectified, given the large number of coal projects seeking registration.

Coal projects are non-additional

There are 39 new coal projects lining up to register under the CDM. It is not clear whether the CDM Executive Board is prepared to evaluate them critically. For example, despite substantial criticism and clear evidence that each of the first six coal projects submitted for approval were not additional, the CDM Executive Board registered five[2] and rejected only one[3]. The rejected project is planning to apply again.

CDM Watch and Sierra Club examined the additionality claims of 20 of the coal projects seeking registration and found that none of them were additional. We submitted detailed comments to the auditors of these projects and to the CDM Executive Board explaining why these projects were not additional[4]. In each instance we found clear evidence that the projects violated CDM rules (and were therefore ineligible), including:

  • Projects had already secured several sources of financing and therefore did not depend on CDM support to proceed using supercritical technology
  • Trying to prove the need for financial support, projects used unrealistically high estimates of supercritical project costs, and unreasonably low estimates of project costs for the subcritical alternative. Projects also consistently failed to provide the data and assumptions on which the financial analyses were based
  • Projects claimed that subcritical technology would be installed without CDM support, despite government or state directives to use only supercritical technology and the fact that sharply rising coal prices make the use of subcritical technology economically unfeasible anyway
  • Projects failed to adequately assess other realistic and credible scenarios, to make coal appear to be the only viable option.

The 44 coal projects currently in the CDM pipeline could generate over 400 million credits by 2020. Their combined annual emissions are so large they are likely to exceed the current annual CO2 emissions of Australia or France or Brazil. Instead of contributing to a low-carbon pathway, these new coal power plants undermine climate mitigation goals by locking in millions of tonnes of CO2 emissions over decades to come and being subsidised by the CDM at the same time. Ongoing CDM support for these projects will lavish hundreds of millions of dollars on an already grossly profitable fossil fuel industry at a time when the world desperately needs to dedicate scarce climate finance towards new renewable energy.

CDM watch recommends that the CDM Executive Board:

  • Suspend the coal methodology. If the coal methodology ACM0013 is suspended, new projects will be stopped from being registered until the baseline flaws are addressed.
  • Reject non-additional coal projects. The CDM Executive Board has a mandate to ensure that only real emissions reductions are eligible for CDM credits. It must therefore reject all projects that apply for registration that are clearly non-additional.
  • Recommend to the CMP that coal be excluded from the CDM. Despite the fact that coal projects clearly undermine climate protection goals the CDM Executive Board does not have the explicit mandate to exclude a technology on the grounds that it is non-sustainable. Such decisions have to be made by the Parties of the Kyoto Protocol (CMP). The CDM Executive Board can issue a request to the CMP to exclude coal from the CDM.

[2] Registered projects: 1,320 MW Tirora project (3225); 3,960 MW UMPP Sasan (3690); 2,000 MW Shanghai Waigaoqiao (3288); 1,320 MW Adani Mundra (2716); 3,960 MW UMPP Krishnapatnam (4533);

[3] 3,960MW Ultra Mega Power Project Tata Mundra