Environmental Technology, News

An active player in clean development mechanism projects

Negotiators of the Kyoto Protocol set up Clean Development Mechanism (CDM) as one of three market-based mechanisms to encourage the private sector and countries to curb greenhouse gas emissions. Norwegians are active at both ends, with Den Norske Veritas as...

Det Norske Veritas (DNV) has been at the forefront of the Clean Development Mechanism certification process. It was one of the first organizations in 2004 accredited to certify CDM projects.

A CDM allows emission-reduction or removal projects in developing countries to earn certified emission reduction (CER) credits, each equivalent to one tonne of CO2. These CERs can be traded and sold, and used by industrialized countries to a meet a part of their emission reduction targets under the Kyoto Protocol.

Up to now, nearly 2,000 CDM projects have been approved over the world. The largest host countries are China, India and Brazil. DNV is the worldwide leader in the approval of CDM projects with a near 50% market share. By the end of 2008, DNV had validated 600 projects in all major industry sectors in over 50 countries.

CDM projects include 14 different technologies, from advanced technology, wind and hydroelectric projects to simple methane projects. At one end of the scale, there are large projects such as the Liaung windmill park in southern China which DNV certified for the Datang Group, China’s fifth largest national power supply company, and the first CDM project that produced certified emission reductions in China.

It Takes a Village

On the other hand, there are simpler projects such as in the small village of Bagepalli, several hours outside Bangalore, India, where DNV approved a CDM project for French company Velcan Energy. The project is based on swapping wood-fired cooking and heating with a low-tech methane biogas plant (digesters), powered by cow dung.

Twenty-eight year old Lakshmi Devamma, one of 70 villagers, has been collecting cow dung and placing it in a “sandbox” outside her kitchen, which is connected to her stove by a garden hose. The company installed 5,500 such plants during 2006 spread over 450 villages. Over the year, the system produced carbon credits equivalent to 19,500 tonnes of equivalent CO2 emissions.

The methane from the dung is 30 times more harmful than CO2 if left on the ground and released directly into the atmosphere. Producing energy from methane rather than wood also contributes to reducing deforestation. This not only lowers CO2 emissions, but reduces the dangers from asphyxiation as a result of carbon monoxide poisoning, one of the most common causes of mortality among women and young children in the Indian countryside, according to DNV. It also spares them from the dangers poised by collecting wood in cobra- infested woods and frees up their time for family life.

The French company will sell emissions quotas on the market, and after seven years the project will be paid off. Best of all, said DNV, after seven years revenues from quota sales will go directly to the villages. “Then we build a new school for our children,” Devamma told DNV in a recent visit to her village.

Norwegian companies are also active as investors in CDM projects. SN Power, a joint venture between Statkraft and Norfund, was set up in 2002 to invest, develop and operate hydropower projects in emerging markets. The company has registered two of the largest hydropower projects to date, La Higuera in Chile and Allain Duhangan in India, representing close to 1 million tonnes of CO2 reduction per year. The company operates in Latin America and Asia and is expanding into Africa.

Norway has bought carbon credits from the CDM project at the Dahuashui Hydropower Project in China.

Carbon Neutral Norway

The Norwegian government is involved at the other end as a key buyer of carbon credits. The finance ministry has the power to enter into contracts for up to NOK 7 billion (800MEUR) of carbon credits in 2009 through Certified Emission Reductions (CER) and Emission Reduction Units (ERU), from the Clean Development Mechanism and Joint Implementation projects. In total, the ministry plans to contract some 30-35 million tonnes for delivery during 2008-2012.

The finance ministry made its first investment in 2007 by purchasing approximately 1 million CERs from the Dahuashui Hydropower project in China, replacing electricity from mainly coal-fired electricity production. Most recently, the ministry signed an agreement to buy carbon credits from Shenhua Group, China’s largest coal miner, under a CDM project. The certified emission reductions will be generated from four wind farm projects in Chicheng and Tongliao in Inner Mongolia autonomous region.

Norway’s purchase of carbon credits will supplement its domestic efforts to reduce greenhouse gas emissions. But the government has even more ambitious goals. It has pledged to exceed the 10% obligation under the Kyoto Protocol by 5 million tonnes during 2008-2012. And by 2020, the country will make further reductions of 10 million tonnes per year, cutting emissions by 30% or more compared to 1990, and become carbon neutral by 2030.

“International emission trading will be an important instrument to reduce global greenhouse has emissions,” said Kristin Halvorsen, Norway’s Minister of Finance. “Norway will actively contribute to the development of this market.”

Norway is also linked to the EU Emissions Trading Scheme (ETS). The allocation plan for phase II of ETS (2008-2012) is about 75 million EUAs (tonnes of CO2), which is about 15 million EUAs annually. The finance ministry plans to offer about 12.7 million EUAs in the market this year.

Separately, Norway is working with Sweden on establishing a “green certificate” programme that would open up for supporting renewable energy projects in return for electricity certificates. The Norwegians hope to have the central principles in place by October 2009.