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Additional reductions from palm oil projects? Not so much for the Dutch

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Dutch CDM projects in the palm oil sector

by Jan Willem van Gelder and Petra Spaargaren, Profundo

The Netherlands, through the Dutch Ministry of Housing, Spatial Planning and the Environment (VROM), authorized the Bermuda-based company AES AgriVerde as a project proponent in 23 projects in the palm oil sector in Malaysia and Indonesia during June 2008 to April 2009. The projects are to capture methane gas emitted by open-air effluent ponds at many oil palm mills.  In a seven year project period, these projects should rack up 4.9 million CERs, translating to an earning of €36.6 million (54.5 million USD) when these CERs are sold at average market prices of €7.50 in the primary market.

However, the captured methane do not result in true reductions, as the methane is used by the mill owners as an energy source, generating heat and electricity which can be used in the mill or sold to the power grid.  A cost-benefit analysis shows that even without CERs, a methane recovery facility therefore pays itself back between 2 and 10 years, depending on the exact use of the methane (heat or electricity).  Thus, van Gelder and Spaargaren argue that the projects of AES Agriverde in the oil palm sectors of Malaysia and Indonesia approved by the Dutch government  do not meet the crucial additionality criterion of the CDM, and these projects should not be registered as CDM projects.

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