The UN will this week decide whether to register 40 emission reduction projects with the potential to generate 16.8 million carbon credits over the next four years.
The clean development mechanism (CDM) executive board, which rules whether such projects are eligible for carbon credits, is holding its 43rd meeting in Santiago, Chile, and will announce its decision after scrutinising the validity of the projects.
While the overall volume is relatively small – between 1.5 and 1.9 billion credits are expected to be generated over the next four years - buyers and sellers of carbon credits will be monitoring the UN body's reasoning, lest it set a precedent for future registrations of CDM projects.
"If a lot from one type of activity were to be rejected it could give a strong signal many more projects in the whole sector could be at risk. The key would be the particular reasons the EB gives for any non-registration,” said Urs Brodman, chief risk officer with consultants First Climate.
Waste projects
Under particular focus are projects that recover waste heat from power generation or highly-energy intensive industrial activities, such as steelmaking.
These such projects account for eight of the projects being scrutinised, or put under review in UN jargon, and can produce around 6 million certified emission reductions (CERs) over the next four years.
The EB has given the green light to around 70 waste heat projects in CDM so far, with the potential to generate around 78 million credits, while 32.5 million have been issued.
But this type of activity has the potential to produce 160 million credits by the end of 2012 if all the schemes listed in the UN's database progress successfully through the CDM pipeline, and cut emissions in line with blueprints.
In waste heat recovery projects that are part of a factory - such as a steel plant, the EB wants developers of projects to justify why projects are using a particular baseline for the steel industry when they are selling power into an electricity grid.
"If it’s decided that a project should be using a power plant benchmark rather than an industry benchmark, then it could be much harder for that project to get registered," said Axel Michaelowa, a consultant with Perspectives, which helps to develop CDM projects.
Guidelines and programmatic CDM
Observers of the CDM process added that the volume of projects being requested for additional scrutiny is likely to remain high until the EB publishes a set of more detailed guidelines for various operators, known as the validation and verification manual.
Project developers claim that UN decisions to approve projects are inconsistent and the reasons given are unclear. This, they claim is causing a bottleneck, with only 200 million CERs issued so far versus supply forecasts of up to 1.9 billion by 2012.
"The completion of the VVM would give more certainty to projects on how to get through the CDM process," Michaelowa said.
The key third area to be addressed by the executive board is ways of removing barriers to programmes that cut emissions, such as widespread dissemination of energy efficient lightbulbs.
This approach has struggled to gain traction in the CDM despite a greater willingness by governments and the private sector to draw up blueprints that cut emissions on a much wider scale than a project-by-project basis.
In particular, developers and auditors want a clearer definition of who will be liable in the event that a programme is ruled ineligible by the EB.
Programmes have been touted by the UN, the World Bank, environmental groups and climate policy experts as a way of cutting emissions at a grassroots level by using cleaner technology in homes and small businesses, contributing to sustainable development – and at the same time earning carbon credits.
