14 july 2011

[The following press release was sent to us by Eva Filzmoser of CDM Watch. CDM (Clean Development Mechanism) is related to the emissions trading system established (in the EU) under the Kyoto Protocol. It permits industries in developed countries to offset required reductions of carbon emissions by investing in "clean" energy projects in developing countries.

Press Release: CDM Executive Board dismisses advice to suspend carbon offsetting coal projects

14 July 2011,Kuala Lumpur. Despite warnings by a United Nations panel of technical experts that coal projects could lead to hundreds of millions of artificial carbon credits under the Clean Development Mechanisms (CDM) the CDM Executive Board members refused today to follow the UN panel´s recommendation to suspend coal projects.

During this week´s CDM Executive Board meeting to conclude tomorrow in Marrakesh, an expected landmark decision on the future of coal fired power plants under the CDM was dismissed. During today´s discussions, Board members refused to follow a recommendation by the CDM Methodology Panel to suspend the super critical coal methodology (ACM0013) on the grounds that it significantly inflates baseline emissions that could lead to over-crediting by 25-50%.

This move was strongly advocated by several Board members, above all the Chinese member, who dismissed the alarming concerns and refused to follow the experts´ advice in order to avoid slowing down the registration process. A third of all CDM coal projects in the pipeline are in China. Other members, including the Norwegian, Belgian and Dutch member urged to take the allegations seriously.

Former Chair of the CDM Executive Board Lex de Jonge said “If assumptions are right there is a potential over-estimation of almost 100 mega-tonnes [of all projects in the pipeline over 10 years]. This is almost the same level as the dispute we have had on HFC-23. This is serious.”

To date there are 37 projects in the pipeline (11 in China and 26 in India) with 5 projects already registered and 32 that could be registered before 2012. The total amount of credits expected from these coal power projects could amount to more than 40 million credits annually and new projects are being submitted on a weekly basis.

Despite these alarming numbers, Board members agreed not to suspend the methodology with immediate effect which would put the projects under validation on ice. Instead they agreed to revise the methodology at a future meeting which allows the 32 projects under validation to keep using the flawed methodology when requesting registration.

“Knowing that there is a chance that a revised methodology could slash the number of credits creates an incentive to accelerate validation so that flawed rules can still be used to generate lucrative credits” commented Anja Kollmuss from CDM Watch. “The fact that the Board ignored this clear and urgent need to suspend this methodology severely harms the credibility of the CDM”.

Although Board members are expected to act in their personal capacity, the CDM Executive Board has been criticized for taking decisions despite clear conflicts of interests.

“Five coal projects currently registered on the basis of the flawed rules will support the Chinese and Indian fossil fuel industry with about 680 million Euros over the next 10 years. It is therefore no surprise that the Chinese member is adamantly opposing the rule changes that would strengthen the environmental integrity while cutting millions of windfall profits“ added Eva Filzmoser from CDM Watch.

With the CDM Executive Board failing to act, CDM Watch is now calling on the European Union to present a proposal that ensures that credits not representing real emission reductions do not enter the European carbon market.

Investors in the coal power projects include Germany´s electricity provider RWE, EcoSecurities, Carbon Resource Management, Japan´s Mitsui & Co, the Bunge Emissions Group, Climate Bridge, the Nordic Carbon Fund and Merrill Lynch.

Press contacts:

Anja Kollmuss (CDM Watch) UTC +7
+41 77 485 3667 or +49 1578 7702218
Email: anja.kollmuss@cdm-watch.org

Eva Filzmoser (CDM Watch) UTC 0
+60 192 917 668
Email: eva.filzmoser@cdm-watch.org


[On July 13, we received the following article that reveals the prior opposition of environmental groups to the decision that was to be taken by the CDM Executive on July 14]

U.N. panel split on CO2 credit rules for coal plants

Point Carbon, 13/07/11, Staff

A panel governing United Nations-backed projects that earn carbon offsets was split on Wednesday over whether to suspend rules that allow carbon credits to be given to developers of high-efficiency coal and gas power plants. The Executive Board of the Clean Development Mechanism (CDM) has come under pressure from some green groups, which say the rules are flawed because the power plants in poorer nations were likely to be viable without the sweeteners of CO2 credits. The $1.5 billion CDM rewards investors in clean energy projects in developing nations with credits called certified emissions reductions (CERs).

Environmentalists' concerns come as a fifth coal-fired power plant was registered by the CDM last week. The 4,000-megawatt power plant in southern India would be eligible to earn 12.3 million tradeable U.N. carbon offsets over 10 years worth about $165 million. ""There is no general agreement on putting the methodology on hold,"" said senior board member Philip Gwage of Uganda, during a meeting of the Executive Board in the Moroccan city of Marrakesh on Wednesday.

The meeting ends on Friday. Members, in a webcast of the meeting monitored by Reuters, generally agreed that the rules, or methodology under which some power plants can earn offsets, could be revised. Gwage is the chair of the panel that guides the many different CDM rules under which clean-energy projects can earn offsets. The methodology in question, ACM0013, is meant as an incentive for investors to go the extra mile by building high-efficiency coal or gas projects that cut fossil fuel emissions. But a key concern is that the methodology could lead to a significant over-estimation of emissions reductions by the projects. A recent analysis by the CDM methodologies panel said that in some cases the over-estimation was about 25 percent. Underscoring those concerns, the panel in a report this month recommended the Executive Board ""put the methodology on hold with immediate effect, and to initiate a revision to the methodology"".

Second case

The case is the second in the past year in which the CDM could be forced to review rules amid accusations of excessive awarding of U.N. offsets. Last summer, the executive board decided to stop issuing CERs to HFC-23 projects while it investigated claims that some developers were intentionally boosting production of the gas in order to destroy it and earn more carbon offsets. One board member said on Wednesday the methodology panel's analysis pointed to the potential over-estimation of 8.5 million tonnes of carbon emissions a year based on all the projects in the pipeline under the ACM0013 rules. ""If you multiply this by 10 years, there's a potential over-estimation -- if the assumptions are right -- of almost 100 million tonnes and that's a huge volume,"" Lex de Jonge, Vice-Chair of the Methodologies Panel, told the meeting. ""That's bringing this to the same level as the dispute we had on HFCs. So this is serious,"" he said. According to a panel member on the webcast, five more power projects are requesting registration for offsets and 34 projects are being validated by U.N.-appointed auditors. The coal and gas-fired projects are in India, China, Indonesia, Iran, Brazil and Argentina. Suspending the methodology would not affect registered projects but could delay projects being validated.

[Sent to us on the Coal EU email list]

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