During this week’s Board meeting, members will decide upon revision requests of 21 projects[1]. According to Point Carbon, these projects are earmarked to reduce about 16 million CERs by 2013, worth around €47 million. Almost half of these emissions are claimed by the 4000-MW super-critical coal plant owned by Costal Gujarat Power (Project Ref Number 3020). But CDM Watch believes that the credits from this project do not represent any real emission reductions. The project must therefore be reviewed and subsequently be rejected.

During the last Board meeting in March 2010, the Board replaced the methodology for this project type – ACM0013 Ver.2 – with a newer version to close a loophole through which project participants could claim emission reductions by “substituting” fuels within the same category (e.g., domestic coal for imported coal). The revised ACM0013 Vers.3 now clarifies that it only applies to reductions achieved by installing more efficient power generation technologies than business as usual. As the Chair of the Meth Panel observed during the 53^rd Board meeting, this revision will protect the CDM by preventing the issuance of “artificial” CERs.

However, project 3020 that claims emission reductions resulting from substituting domestic coal for imported coal had requested registration on 23 February before the revision took effect on 25 March. Although the Board clearly revised the methodology to avoid “the issuance of “artificial” CERs”, according to current CDM rules[2], the project is still allowed to use the flawed methodology.

If registered, this project would be the third largest non-HFC-23 project ever registered under the CDM. But an analysis by Stanford Environmental Law Clinic[3] on the application of the revised ACM0013 reveals that Project 3020 is not additional. The analysis shows that Project 3020 would be non-additional under the revised ACM0013. While Project 3020 is proposed as a supercritical coal project with a subcritical coal baseline, the additionality of the project rests solely on whether project participants can take credit for emission reductions achieved by “switching” domestic for imported coal. When these fuel source differences are neutralized, the supercritical project option (i.e., the project itself) is the most financially attractive baseline scenario. Accordingly, under the revised ACM0013, Project 3020 should not generate CERs because the registration of the project would cause 2.65 million CERs annually to flood the CDM market and undermine the Kyoto Protocol.

While the project is clearly non-additional if calculated according to the new ACM0013 Version 3, the project also causes serious concerns in relation to Version 2. These concerns were shared by at least three members of the Board who finally requested a review[4] which will be discussed during this Board meeting. Concerns pertain to the project’s additionality, to its basic compliance with the methodology and other rules and to its insufficient provisions for monitoring and verification.

Moreover, Stanford Environmental Law Clinic revealed in a recent analysis[5], conducted on behalf of CDM Watch, that the methodology ACM0013 is in urgent need for review. The study concludes that ACM0013 fails to ensure the additionality of CDM project activities and violates Article 12 of the Kyoto Protocol. Non-compliance with the methodology of all projects in the pipeline to date – including Project 2716[6], the only registered ACM0013 project – is so pervasive that no project submitted to date 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.

The urgency of the case is underlined when looking at the CDM pipeline[7]. Since the registration of the first supercritical coal project in December 2009, 10 (!) new projects were submitted for validation[8]. To date there are 25 projects in the pipeline earmarked to reduce more than 25 Mio.t/CO2 annually. At a price of 12 € per tonne, this would make about 300 Mio. €/yr.

Action to be taken by the Board: CDM Watch urges the Board to agree upon the review of project 3020 and to reject the project subsequently. Under the revised ACM0013, Project 3020 should not generate CERs because the registration of the project would cause 2.65 million non-additional CERs a year to flood the CDM market and undermine the Kyoto Protocol.

Moreover, in light of the significance of the flaws in ACM0013 that were not dealt with in the recent revision, the Board must suspend methodology ACM0013 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.