During this meeting, Board members may approve the Methodologies Panel’s revisions to the approved methodology ACM0013, “Consolidated baseline and monitoring methodology for new grid connected fossil fuel fired power plants using a less GHG intensive technology.”

CDM Watch commends this important first step in recognizing the inconsistencies within ACM0013, as highlighted by the Meth Panel. However, at the same time, CDM Watch is highly concerned about the methodology’s severe shortcomings with respect to additionality. These can only be addressed by a more fundamental revision of ACM0013.

On behalf of CDM Watch, the Stanford Environmental Law Clinic conducted a review of ACM0013 and all projects proposed under this methodology to date. They conclude that ACM0013 fails to ensure the additionality of CDM project activities and violates Article 12 of the Kyoto Protocol. Non-compliance with the methodology is so pervasive that no project submitted to date—not even Project 2716[1], the only registered ACM0013 project—complies with the methodology and the Executive Board’s rules and guidance. But more critically, ACM0013’s substantive shortcomings, as well as its lack of specificity, clarity, and consistency, are such that improving compliance alone would be insufficient. The methodology itself requires substantial revision to uphold the Kyoto Protocol.

To start, ACM0013’s alternatives analysis fails to ensure that projects consider all plausible baseline scenarios. As a result, the investment analysis focuses on too few alternatives. This jeopardizes the selection of the most financially attractive scenario. For example, none of the projects consider hydropower or any renewable energy source such as geothermal, biomass, wind, and solar to be a realistic or credible alternative to fossil fuel generated power. Moreover, ACM0013’s investment analysis neglects to consider revenues as clearly as costs, distorting the financial calculation. Current tariffs in India and China are likely to make other technologies more cost effective than coal. But 12 out of 14 projects do not consider revenues in their investment analysis. Without a robust investment analysis, sensitivity analysis adds dubious value to the question of additionality. Further, ACM0013’s sensitivity analysis can be interpreted so narrowly as to rob it of its intended effect. The analysis suggests that not subcritical but rather supercritical or even ultra-supercritical plants are the most economically attractive. Finally, common practice analysis is intended to provide a “credibility check” to the additionality analysis, but does not act as a credible safeguard in the ACM0013 context.

For the detailed analysis to the critiques by the Stanford Environmental Law Clinic and specific proposed changes to the language of the methodology see http://www.cdm-watch.org/?cat=4.

CDM additionality expert Barbara Haya backs these findings. She concludes that the inclusion of coal-based power in the CDM not only risks allowing industrialized countries to increase their own emissions without reducing emissions elsewhere, but it also risks increasing emissions in developing countries by improving the financial returns from coal-based power production.

Despite heavy criticism, the first coal power plant by Adani Power Ltd (Project 2716) was registered as a CDM project in December 2009. According to UN rules, two 660 MW units to be commissioned in 2010-11 in India will receive carbon credits for reducing emissions using a new, efficient coal-based technology compared to conventional coal-fired power plants. Ironically, the project was on the agenda of the 51^st Executive Board meeting where 10 wind projects were rejected for having failed to prove additionality. However, 2 of these 10 projects were finally registered last month because they were on the “wrong list”[2]. Now, CDM Watch is wondering whether the Adani Power Ltd project was also on the “wrong list” but should actually have been rejected due to insufficient proof of additionality.

Previously, investors have shown little confidence for supercritical coal to get approval under the CDM[3]. However, the registration of the first project by Adani Power Ltd has sent a signal to the carbon market which resulted in re-submission of three coal power projects and the recent registration request of the largest coal power project currently submitted, also by Adani Power Ltd. If registered, the Adani Power Ltd´s project in Mundra, India with a capacity of 4000 MW would be the third largest registered project amongst all currently registered CDM projects, excluding projects that reduce industrial gases HFC-23 and N2O. With a price of 12 € per tonne, the expected 2.831.000 annual emission reductions would generate about 34 Mio € per year. As happens with all supercritical coal projects in the CDM pipeline, this project is clearly non-additional. Along with the Sasan plant[4], it is even listed as part of the India Ministry of Power “ultra mega policy”[5], a clear indication about plans to build the plants anyway and making it thus, non-additional.

While the Indian CDM coal power projects don’t have any committed buyers yet, UK´s EcoSecurities, UK´s Carbon Resource Management, Japan´s Mitsui & Co and Switzerland´s Bunge Emissions Fund have signed deals to buy credits from clean coal projects in China. Also Germany´s largest energy utility, RWE, which is heavily criticized for its polluting coal plants in Germany has signed a purchase agreement to buy credits from a coal power plant in China in order to meet its emission reduction requirements in Germany.

Action to be taken by the Board: In light of the significance of the flaws in ACM0013, the Board must suspend methodology ACM13 by putting it on hold, with immediate effect. The Board shall request the UNFCCC secretariat and the Meth Panel to conduct a thorough assessment and review of the methodology, including a public call for inputs.

As a response to the serious concerns about the additionality of the 1.8 million annual emission reductions of Project 2716, the Board shall review the registration of Project 2716 as well as review all other projects submitted under the current methodology to date[6].