Gemeinsame Klimaschutzprojekte - Von Rio nach Buenos Aires

1
Side Event Small scale CDM projects New Delhi,
Oct. 26, 2002
Options for making small scale CDM projects more
attractive
Axel Michaelowa Hamburg Institute of
International Economics, Germany a-michaelowa_at_hwwa
.de
2
Structure of presentation

• Why small scale projects are unattractive
• Possible rules and their effects on transaction
  costs
• thresholds
• baselines
• project cycle steps
• What project types could be attractive?
• Conclusions

3
Why are small-scale projects not attractive?

• CDM buyers market price 3-5 / t CO2
• Transaction costs of full project cycle several
  hundred thousand
• All projects reducing less than 20,000 t CO2
  per year will not be attractive

4
Thresholds for small-scale projects and
transaction costs
5
Thresholds

• If a project has several components belonging
  to different categories each component will be
  treated as a single project
• 15 GWh average or peak savings?
• 15 kt threshold can be interpreted creatively
  and lead to the acceptance of large-scale
  projects (see landfill gas example)

6
Baseline options

• Pre-defined parameters for project-specific
  baselines depending on project type
• Proxies for project activity levels that
  influence baseline emissions
• proof of existence
• proof of functioning
• Country-specific pre-defined baseline or
  benchmark
• Global pre-defined benchmark for specific
  project types
• Global pre-defined baseline for specific project
  types

7
Additionality tests

• No other project of the type exists in the host
  country
• A specified number of pre-defined investment
  barriers exists
• Projects generation costs are higher than the
  generation costs of the countrys expansion plan
  in the case of grid-connected electricity
  generation projects

8
Transaction costs on each step of the project
cycle
9
Options to reduce transaction costs
10
Draft rules for small-scale projects

• Bundling allowed, but only up to threshold
• Same entity for validation and verification
• Partial standardisation of baseline
  methodologies and barrier assessment
• Exemption from leakage determination
• Only influences limited share of transaction
  costs
• Critical test comes when decisions on fees are
  made (5000 registration fee is still much too
  high)
• The rules cannot decisively reduce the
  disadvan-tage of projects below 20,000 t CO2
  annual reductions

11
Conclusions

• Small-scale projects have an inherent
  disadvantage due to high unitary transaction
  costs and will thus not be attractive to private
  investors
• The suggested small-scale project rules
  alleviate, but do not solve the problem
• Projects near the thresholds may have a chance,
  especially if rules are interpreted creatively
• Subsidisation could make small-scale projects
  more attractive, but entails other problems.

12
Thank you!Further informationwww.hwwa.de/clim
ate.htmor climate_at_hwwa.de