Carbon Market Watch

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SEI Policy Brief: Transitioning away from large-scale power projects: A simple and effective fix for the CDM?

21 Nov 2012

PDF (English)

This policy brief, based on SEI research for the High-Level Panel of the CDM Policy Dialogue, shows how large-scale power supply projects may undermine the value and integrity of the CDM and proposes transitioning away from them.

Policy Recommendations:

  • The CMP and the CDM Executive Board should consider steps to graduate large-scale power supply projects from the CDM, such as ceasing registrations and crediting period renewals of these projects.
  • Buying countries should consider disallowing purchase of CERs from large-scale power supply projects after a certain date and/or credit vintage.
  • Countries should support mechanisms other than project-based offsets to promote lower-carbon power

Despite years of development, experience, and revision, the Clean Development Mechanism’s method for assessing additionality remains controversial and contested. For some project types, additionality is relatively certain, but for large-scale power supply projects, which are expected to generate the majority of CDM credits going forward, additionality is hard to demonstrate with high confidence.

The value and integrity of the CDM may hinge on the net emissions impact of these large-scale power supply projects. If they are truly additional and operate well beyond the credit issuance period, they can lead to a decrease in global greenhouse gas emissions. If they are mostly non-additional, as research suggests, they could increase cumulative global greenhouse gas emissions by over a gigaton of CO2e through 2020.

A transition away from such CDM projects could help address the over-supply of Certified Emission Reductions (CERs), support projects that truly depend on CERs, and improve the CDM’s overall mitigation impact. However, such a transition would need to be carefully considered, bearing in mind governance and legal aspects and the need for investor confidence.

Link to SEI site: download the policy brief at Transitioning away from large-scale power projects: A simple and effective fix for the CDM?; the underlying report, Assessing the Impact of the CDM, is available here: Assessing the Impact of the CDM