Two new studies confirm that coal power plants in CDM are not additional and are severely over credited. CDM Watch calls for the removal of this project type from the CDM.

Coal currently generates over 40% of the world’s electricity. Coal use is the leading cause of climate change and local air pollution For example, in China coal now accounts for 70% of particulate emissions, 90% of sulfur oxide, and two-thirds of nitrous oxide and CO₂ emissions. Over the past 30 years, the global power sector has been the largest contributor to growth in global CO₂ emissions. The continuing rapid expansion of coal power presents a major threat to climate stabilisation.

Coal plants emit billions of tons of CO₂, locking in emissions for decades to come. Even ultra-supercritical coal plants produce twice the emissions of a new natural gas plant.  The International Energy Agency (IEA) shows that in order to meet the Cancun Agreement’s 2°C goal, recently built coal plants need to be shut down well before the end of their economic lifetimes.  It thus makes little sense to be building new coal plants today.

However, new coal plants in developing countries can apply to receive credits (CERs) under the CDM if they can show that without the CDM they would have been built less efficiently. Currently 45 coal projects are in the CDM pipeline, six of these have already been registered (see table below). If all 45 projects are approved, they could generate up to 451 million CERs worth billions of Euros of public and private climate finance.

Coal power projects in the CDM pipeline

These projects are all being built in India and China, where coal is already represents 70% and 80% (respectively) of electricity production. Investors in these coal power projects include Germany´s electricity provider RWE, UK’s EcoSecurities, Carbon Resource Management, Climate Bridge, Japan´s Mitsui & Co, the Bunge Emissions Group, the Nordic Carbon Fund and Merrill Lynch.

As we show below, these CDM coal projects not only perpetuate the use of coal, they further undermine climate coals because they are non-additional and severely over-credited.

Coal plants are non-additional

Over the past few decades, new coal plants have become progressively more efficient.  Globally, supercritical and ultra-supercritical technologies have rapidly gained market share over less efficient subcritical plants. These more efficient technologies are a protection against rising coal prices. International coal prices rose steeply throughout the past decade, roughly on the order of 10% per year.

A new study by the Stockholm Environment Institute (SEI) confirmed that more efficient coal technologies are being rapidly adopted due to price pressures and numerous Indian and Chinese government policies that mandate higher efficiency technologies. In other words, the 45 coal projects currently in the pipeline are not dependent on CDM financing and are therefore not additional. Giving credits to such business-as-usual projects results in a global increase of CO₂ emissions.

Coal plants are over-credited

The number of credits each plant can receive is calculated according to the rules specified in the coal methodology (ACM0013). Earlier this summer, the UNFCCC’s Methodologies Panel called for the suspension of ACM0013 because it realised that under the current rules projects will receive too many credits.

The CDM Executive Board ignored the Methodologies Panel’s recommendation and instead commissioned a new report from them.  The Methodologies Panel released this new report in early November, reiterating its call for an immediate suspension of the methodology. The new report more than doubles the Methodologies Panel’s prior estimate of the extent of the over-crediting from 51% to 62%.  The findings are consistent with the results of the SEI study which calculated coal projects are being over-credited by 71%.

These numbers are staggering: This research shows that coal projects could receive up to 4 times as many credits as they should get if they were additional. In other words, if these projects were truly more efficient with CDM support than without it, they should receive somewhere between 130 – 220 million credits. But since coal projects are both non-additional and over-credited, they could receive 450 million artificial credits that will increase global emissions and further undermine climate protection.

Both studies find that the over-crediting is caused by:

• Project developers use outdated information that conceals the rapid technological shift away from subcritical technology occurring in India and China.
• Projects significantly overstate the efficiency benefits of switching from subcritical to supercritical technologies.
• The methodology does not account for variables that can have significantly larger impacts on carbon emissions than the choice of boiler technology.  The SEI study points out that this may have the unintended effect of penalizing projects that minimize local air pollution impacts.

The Meth Panel report recommends a number of changes to ACM0013. However, these changes are not sufficient to ensure that no artificial credits are issued. This is because several of the issues identified in both studies are not addressed, including the impact of other variables on plant efficiency and the lack of data quality. The suggested revisions also do not address the systematic deficiencies in the additionality analysis or the broader issue of coal power’s large contribution to climate change. The coal projects in the CDM pipeline are locking in over 400 million tCO₂ in annual emissions – as much as the annual CO₂ emissions of countries such as France, Spain and South Africa.

CDM Watch recommends:

The results of both studies make it clear that coal projects do not belong in the CDM. CDM Watch calls on decision makers to:

• Immediately suspend methodology ACM0013 and stop registering new coal projects.
• Particularly, reject the 4807 Energy Efficient Power Generation by Nabha Power Limited up for review at this upcoming CDM Executive Board meeting.
• Given that a methodology revision would not be sufficient to address all of the identified flaws,

coal plants should be excluded from the CDM at the upcoming climate change conference in Durban

• Ban the use of carbon credits from coal projects in the EU-ETS and all other emissions trading schemes using CDM cre