Story of CDM - part 1

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It was the year 1997, place Kyoto, Japan. One of the milestone meetings held under United Nations Framework Convention on Climate Change (UNFCCC). After much debate Conference of Parties (COP) adopted Kyoto Protocol(Kyoto Protocol) as an immediate solution for climate change issues. As a testament to the issues it had, Kyoto Protocol took 8 years of its 15yrs of its 1^st Commitment Period (CP1) to enter into force under the UNFCCC. Nevertheless KP gave birth to whole new market mechanisms, introducing a whole new commercial product which went on to revolutionized the world of innovators, financiers and overall development of the whole world. Those mechanisms are known as Joint Implementation (JI) and Clean Development Mechanism(CDM) and that commercial product is better known as Carbon Credits.

Clean Development Mechanism, and Joint Implementation are the paternal twins of KP. Where the JI focused only developed countries, CDM focused on rest of the world. Reason why CDM is more popular than JI is because of the larger audience CDM catered to. Now this isn’t about the controversial KP or the rivalry between the brothers JI and CDM. Its only about CDM.

Clean Development Mechanism or CDM is a market mechanism which dictated that the Country A who had technology, financing and any other resource of importance/use to reduce carbon emission would use those in a CountryB which has no such technology, finance or any other resource of importance/use. And in return the emission reduced or the Carbon Credits produced would be owned by the Country A.The idea behind is the credits earned by Country A from Country B using CDM would be used to offset the emissions of Country A so as to meet the any commitment (if any) of Country A under the KP.

Ok before I head on, I should explain, under KP, the Parties to KP were categorized into 2 groups. The Developed Countries aka Annex 1 countries and Developing Countries aka Non-Annex 1 countries. Annex 1s are the have it alls, and Non-Annex 1s are the want it alls. Although imperfect CDM gave an avenue under KP to let them both have what they want (I.e. to be have it alls). This particular grouping is the main reason why KP is under fire today, but will not talk about that here.

Now under CDM, green technologies (which were environment friendly and reduces the green house gas) which were expensive than normal technologies got a financial edge. That is by the emission reduced by using green technology instead of using normal technology will be counted as Certified Emission Reduction (CER). By the way 1 CER is 1ton of CO2 equivalent. Due to the emission reduction commitments of Annex 1 countries and the high cost of reducing that much emission whithin their country left them needing CER to meet their commitments. And with lower cost of CO2 reduction in Non-Annex 1 Countries in comparison with the same in Annex 1 countries, CDM became attractive. But CDM was new and it took time to set up some rules/guidelines and whatever else needed for it. And that caused the huge demand and low supply of CER by CDM in the beginning, the price of CER in the market sky rocketed attracting everyone and anyone who had something to offer into the carbon business (technology developers, financiers, brokers etc...). And thus began the story of CDM.

Fate of Kyoto Protocol

It been almost 14 years since the Conference of Parties to UNFCCC met in Kyoto, Japan which gave birth to infamous Kyoto Protocol. It was the very first legal framework to combat climate change born out of the convention and as it is now the only one. Kyoto Protocol has been a source of controversy ever since it came into existence. Kyoto Protocol is based on the following principles:

• ·         Emission reduction commitments from Annex I countries (developed countries)
• ·         Implementations of supplementary mechanism that would help Annex I countries to achieve their commitments. These mechanisms is better known as Clean Development Mechanism (CDM), Joint Implementation (JI) and Emission Trading System (ETS)
• ·         Establishment of adaptation fund to assist developing countries to adapt to climate change
• ·         Accounting, Reporting, Reviewing and compliance of the commitments

Kyoto protocol has tried to address all aspects of the struggle against climate change, but it is far from complete. Especially when the biggest GHG emitter at the time refused to take part, i.e. America, in the protocol and forming an umbrella group with countries of similar mindset. In this context it is strange that in formulating the protocol Americans gave huge inputs. And over the period of last one and half decade all new sets of problem has cropped up like countries who championed Kyoto Protocol like Japan, Russia, Canada has expressed their disdain for the extension of protocol. And they have good reason to be so. That is;

• ·         The resources put into achieving the commitments have put huge burdens on their economy and in some cases economy has shrunk. And still could not achieve the targets
• ·         They are no longer the only large emitters with emergence of China, India, Brazil, Mexico, South Africa, Indonesia, Korea and etc who are non-Annex I as larger emitters and do not have a commitment.
• ·         And the fact that zero emission from Annex I would not have enough impact achieve the required levels of Global emissions.

Thus it is apparent there needs to be some major changes required. But there is some serious opposition to the changes to Annex I list to include all major emitters or to have legal commitments as before. Although, there are no provision that would enable the COP to punish a country for not adhering to their commitment under the protocol (making Kyoto protocol a toothless one).

The COP has been going back and forth about the improvement and extension of KP under the alias of AWG-KP. At the same time discussion is going on a separate negotiation track under the convention AWG-LCA to have a new agreement which could supplement or even replace the KP. AWG-KP now has a little over one year(deadline is 2012), to formulate a mutually agreeable terms for the KP extension (2^nd Commitment Period), endorse within the COP and give enough time for enough number of parties to ratify it within their government. Given the 7 year time frame taken by the parties from adoption of KP to enforcement of KP, it is widely agreed that one year might not be enough to adopt and enforce the extension of KP. And having a gap between CP1 and CP2 of KP is not acceptable to many parties. And the gap could a reason to kill the KP.

So, in conclusion, KP talks have been delayed too much and any more delay would lead to a gap between CP1 and CP2. And the COP has just one year and 2 COP meetings to resolve the issues and save the KP. There are still ambiguities about KP, but one thing is for sure the decision whether KP lives or dies will be decided in COP18 in Durban

Sea swell incident in Huvadhoo in 2011

 Path the wave took onto Hoadhehdhoo main road

 The reach of the wave on the main road of Hoadhehdhoo (roughly 500ft from beach)

 The dust lines mark the height of water on the flooded main road of Rathafandhoo

 Near southwest shore of rathafandhoo (this is where the wave came in most)

 The natural protection at rathafandhoo breached at western shoreline

 Waste washed off at Fares mathoda with the wave

 Protection build up by locals in anticipation of the wave in Fares mathoda

Fares maathoda bay (this is where the wave came in

Climate Change adaptation for Ministry

Picture taken on 13th April 2011 at the from gate of Ministry of Housing and Environment. Its pretty clear why Maldives needs to adapt to climate change as fast as possible.

CDM in Maldives

Agreement of Collaboration being signed between the Ministry of Housing and Environment and UNEP Risoe on development of CDM (clean development mechanism: if you dont know refer to http://unfccc.int/kyoto_protocol/mechanisms/clean_development_mechanism/items/2718.php)  and LCS (Low carbon strategy). This whole thing is funded by the Danish

Dhiffushi PV project

The signing of dhiffushi Solar PV project. 40kW PV to be installed and hybridized with the existing 140kW diesel generator sets. Installation work  to start early 2012 and finish by the end of 2012

Carbon Neutrality – Environmental Option or Economic Necessity for Maldives

Over two years ago, when Maldives announced their intent of becoming carbon neutral in 10 years, I was left pondering what it meant, what would have to be done and what would it achieve ultimately. Back then the news was met with huge criticisms both nationally and internationally. Two and half years later I find myself justifying and promoting that goal but not as a tool of environmental sustainability but as a tool for self sustaining the Maldivian economy.

I may not be an economic expert, but it’s not rocket science to understand the link between energy use and economy. They are proportional more or less. So I jot down some stats in this regard as my justification.

•          Since 2003 in Maldives annual GDP growth is 11% with 2004 tsunami and 2008 economic shocks
•          In comparison annual growth in energy demand is 9%.

Seems fair enough, but the problem is here,

•          99% of that energy demand is met fossil fuels and the
•          In 2010 price of fossil energy is more than 3X what it was at the start of this century.
•          Price of fossil fuel energy has been rising at an annual rate of about 20% with huge volatility between the years.
•          Maldives fossil fuel energy expenditure has been rising at roughly 30% annually

And ultimately as the above figures suggests, fossil fuel expenditure is gaining 1.4% every year in its share in the national expenditure. Now for country hard pressed for having expenditure greater than their income, this is bad news. And as a newly graduated Middle income country, there is an exceeding risk of regression back to a Least Developed Country. Not only that, but in long term if it continues the same the collapse of the economy is inevitable. But the solution is obvious, go low carbon. Exploiting energy conservation, energy efficiency and locally available renewable energy opportunities will definitely save a huge portion of the energy bill. Reducing the overall expenditure, and attaining better balance of payment. The new and emerging green industries like energy servicing companies, carbon auditing firms and climate financial institutes can take the economy to new heights.

Hence this new source of income and the reduction of old expenditure, can self sustain this troubled economy. And environmental benefits and carbon reductions looks nothing more than a simple byproduct in comparison to its long term economic gain. And for those who are wondering what the monetary value of all the above stats, in 2010 Maldives energy bill was a little over 245 million dollars against a GDP of 1.448 billion dollars.