Carbon Market Watch

For fair and effective climate protection.

The End of CDM Coal Power? (Newsletter #20)

12 Jul 2012

The CDM Executive Board members get a big thumbs up for rejecting a Chinese coal project due to its questionable additionality calculations. Whether the Board can keep up this spirit at its upcoming meeting remains to be seen when they are due to discuss a new version of crediting rules for CDM coal power projects for the second time. Although the revised methodology has been improved considerably, it does not yet fully address the concerns that initially led the Board to suspend it. This version still undermines the CDM goals of mitigation and sustainable development – so it’s not fit to be used!

As reported in our last newsletter, the CDM Executive Board suspended the coal crediting methodology (ACM0013) in late 2011. This happened after the UNFCCC’s Methodologies Panel, which is in charge of the CDM’s crediting rules, presented evidence in a report that coal power projects in the CDM are severely over-credited. Following a first proposed revision in May 2012, a public call for input was launched. Based on this, the Methodologies Panel has now prepared a second revision which will be discussed by the CDM Executive Board at this upcoming meeting.

However, while the revised methodology has been considerably improved, it does not yet fully address the concerns that initially led the Board to suspend it. In particular, the revised methodology still fails to:

– Address the low signal-to-noise ratio of efficiency improvements in coal fired power plants

– Limit the unintended outcomes that conflict with the objectives of the CDM, notably by putting advanced pollution control devices at a disadvantage

– Overcome the challenge of obtaining required and verifiable data

– Avoid perverse incentives that may be caused by the new standardised baseline scenario

– Avoid an underestimation of baseline emission rates

– Uphold the environmental integrity of the additionality assessment

– Address the shortcomings of the common practice test in the context of coal fired power plants

– Require adequate consideration of baseline alternatives.

These issues are addressed in further detail in the letter submitted by CDM Watch and Sierra Club to the CDM Executive Board in response to its public call for input to the Boards’ annotated draft agenda.

These technical shortcomings are particularly problematic, insofar as they will amplify weaknesses inherent in the ACM13 methodology. Coal plants are the highest-emitting electricity resource, and the International Energy Agency has repeatedly warned that the continued development of coal power will make it impossible to hold global warming at safe levels. The use of much needed CDM finance for  new,  large and long-lived coal  plants (even if it leads to slight increases in the efficiency of some coal plants) therefore threatens to undermine the 2°C objective. Moreover, coal fired power plants inflict severe toxic burdens on local populations and ecosystems.

CDM Watch applauds the CDM Executive Board for rejecting the Chinese project 5027 which slipped through to the registration process before the suspension took effect. The final ruling reflects many of the detailed comments provided by CDM Watch and Sierra Club on why the project is not additional. Well done members of the CDM Executive Board on this decision!

Once a methodology revision has been approved, the remaining projects that are currently in the pipeline will have to conform to the new rules and can then apply for registration. It is essential that the CDM Executive Board does not take any hasty decisions on this important matter because it would open door for at least another 45 coal projects located in India (32) and China (13).

CDM Watch and Sierra Club urge the CDM Executive Board not to approve a revision of ACM0013, unless it can be proven beyond doubt that the new revisions are able to address all issues of this project type that currently undermine the goals of mitigation and sustainable development.