CDM coal power projects beyond repair (Newsletter #18)

A new paper highlights that even stringent revisions of the rules for CDM coal projects are highly unlikely to result in credits that represent real emission reductions and bring sustainable development. A revision will also not apply to the six projects that are already registered. A seventh project is still trying to get registered under the old rules despite clear evidence that it is non-additional. 

In November 2011, the CDM Executive Board suspended the coal crediting methodology after the UNFCCC’s Methodologies Panel presented evidence in a report that coal power projects in the CDM are severely over-credited.[1] The expert panel is currently revising the rules and will present a revision at the next CDM Board meeting in May 2012.

However, a follow-up policy note by SEI highlights that such a revision is unlikely to be able to ensure that credits from coal power projects would represent real emissions reductions. It highlights that several of the issues identified in both studies, including the small efficiency gains and the large project emissions, the impact of other variables on plant efficiency and the lack of data quality cannot be resolved completely by a revision.

The revisions also cannot resolve the contradiction of using climate finance to support  long-lived emissions-intensive infrastructure that undermine the ability to meet 2°C climate stabilisation objectives. The ACM0013 pipeline of 45 coal power projects offers, at most, only small improvements in efficiency while locking in over 400 million tCO2 in annual emissions over several decades.

The SEI study also showed that it is highly unlikely that any of the coal power projects are additional. This is due to existing fuel price pressures and numerous Indian and Chinese government policies that foster or even require super critical and ultra-super critical coal design, without the need for CDM funding.

The Zhejiang Jiaxing Coal Power Project, another “Ulsan”

The latest non-additional coal project is the Chinese Zhejiang Jiaxing coal power plant[2] which submitted its registration request just before the CDM EB suspended the methodology in November 2011. A similar situation happened when the HFC-23 Ulsan project requested renewal of crediting period just before the HFC-23 methodology was suspended in November 2010. The problem in these situations is that according the UN rules, the old (but flawed) methodology still applies. This means that the project could be over-issued credits. Ulsan did end up renewing its crediting period under the revised and more stringent new rules. However Zhejiang Jiaxing should not be registered at all because in addition to the flawed crediting rules, the project is clearly not additional.

To be considered additional, a project has to prove that it could not go ahead without income from the CDM. At the last Board meeting some Board members acknowledged that when the difference in profits is very small it is “not credible to support claims that only CDM is decisive for an investment decision,” especially in the case of large infrastructure projects where other strategic considerations strongly influence the decision making process.

However, the project developer of Zhejiang Jiaxing argues that 0.002 Euro/kWh in additional revenue due to the CDM is what makes it possible to build a more efficient new coal fired power plant. While a request for review has been issued for of Zhejiang Jiaxing, we are concerned that the scope of review will not address all of the arguments outlined in the detailed analysis submitted by CDM Watch and Sierra Club.

CDM Watch calls on the Board to extend the scope of review to the issues outlined in our analysis and subsequently reject this project.

CDM Watch calls on the Board not to approve any methodology revision for 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 dual goals of mitigation and sustainable development.

Coal Projects in the CDM Pipeline

  • Currently 45 coal projects are in the CDM pipeline, located in India (32 projects) and China (13 projects)
  • Six of those projects have been registered
  • The other projects cannot apply for registration until a new methodology has been approved
  • A seventh project[3] slipped through to the registration stage just before the ban took effect. CDM Watch and Sierra Club provided detailed comments to the Board on why the project is not additional. Three Board members have initiated a request for review

The methodology revisions will not affect the six already registered projects which could generate 89 million CERs under the flawed, now suspended methodology.