Feature

Clean Development Mechanisms: Way to Go

Posted on 21 January, 2010 | Tags:

The God gifted pleasant environment's contents have been imbalanced due to chaotic industrialization. The direct or indirect unfavorable effect of development is billowing of emission of Green House Gases (GHGs) like CO2, CH4, N2O, HFCs, PFCs, SF6 etc, which are the consequential of Industrialization.

Industrialization is the need of the day and the worldwide focus is on increasing industrial output but unfortunately we have never looked behind the development and thought of the adverse effect of so called rapid and haphazard development. It is always splendid but it would be better if we could sense the adverse effects, which are directly related to the industrialization. Now we talk of world becoming smaller and have started realizing the kind of problems that our future generations may have to face, if we couldn't go with sustainable development. The God gifted pleasant environment's contents have been imbalanced due to chaotic industrialization. The direct or indirect unfavorable effect of development is billowing of emission of Green House Gases (GHGs) like CO2, CH4, N2O, HFCs, PFCs, SF6 etc. which are the consequential of Industrialization. These GHGs have formed a blanket over the earth and are the major cause for the Global Warming which day by day is reaching towards an alarming level. Aiming the sustainable development, there is a need to reduce the emission of GHGs to the environment. In order to endorse the sustainable development, Kyoto Protocol was established on 11th December 1997 and come in to force on 16th February 2005. It is an international agreement linked to the United Nations Frame work Convention on Climate Change (UNFCCC). This protocol sets the targets for developed countries for reducing GHG emission by 5.2 percent against 1990's level by the year 2008 to 2012.
As per this protocol the developed countries are placed as Annex-I countries and the developing countries are placed as Non Annex-I countries. The developed countries must meet their targets primarily through their own measures. However protocol offers them another way for meeting their targets by way of market based mechanism, which is called 'Clean Development Mechanism' (CDM). This mechanism is administered globally by UNFCCC and in India it is governed by the Ministry of Environment and Forest (MoEF). This is to encourage the developing countries to contribute to emission reduction efforts. Thus CDM involves investment in sustainable development projects, which reduce emission in developing countries.

What is a CDM Project?
Any project which provides additional GHG emission reductions to what would otherwise have occurred is termed as CDM project. Projects like Fuel Switching (From high carbon intensive fuel to Low carbon intensive fuel), Energy Efficiency, Green field energy projects, power generation from renewable energy sources, Methane emission reduction followed by waste management projects, GHG abatement projects etc can be considered as CDM projects.

Eligibility criteria for CDM projects.

• Project should belong to Non Annex-I countries.
• Should not have been started earlier than year 2000.
• It is not to be bound with current laws and legislation.
• It should not be a common practice.
• It should not be most lucrative investment option.

Types of CDM projects
CDM projects are classified as small-scale CDM project or large scale CDM project depending on the annual energy saving by the proposed project. If the energy saving is less than 180 GWH/Year or power generation of less than 60 GWH/Year or installation of green field power plant having less than 15 MW capacity then these project are considered as small scale CDM project. All other projects with higher than these are considered as Large Scale CDM projects. A nominal amount is to be paid to UNFCCC as registration fee before registration of large scale CDM project while no fee is required to be paid for small-scale projects.

Selection of Methodology
Once the project is identified by the Project Proponent (PP) then selection of Methodology plays an important role in CDM project. Many kinds of methodologies are readily available on UNFCCC web site and PP has to locate the appropriate methodology for its identified project. Some times it may happen that the available methodologies are not appropriate for the identified project, then PP can also apply for new methodology with UNFCCC. Though it is time consuming but results are expected based on logical requests.

PIN,  PCN and finally PDD
After selecting appropriate methodology, PP can start preparing Project Idea Note (PIN), Project Concept Note (PCN) and Project Design Document (PDD). PDD is the bible of particular CDM project. PP has to mention every thing related to project in the PDD and the contents of PDD normally include Location of the project, boundary of the project, brief description of process and organization, baseline description, appropriate reason for selecting particular methodology, additionality of the project, approximate number of emission reduction in terms of tonnes of Carbon Dioxide per annum etc. PP can employ a consultant to prepare these documents. It is always recommended to employ a consultant looking to enormous paperwork and technicality involved.

Local Stake Holder
It is mandatory for the project Proponents to arrange local stake holders meeting to make them aware with CDM activity, how it is helpful to bring down GHGs level to the environment and how it is benefited to them also. During the meeting any stake holder can raise their concern which is to be sufficed by PP. During the meeting PP has to display the Project Concept note of the proposed CDM project in front of the stake holders and also provide explanation on the project by means of presentation or by distributing leaflet in local language. The minutes of meeting are required to incorporated in to the PDD, before going for Host Country Approval. PP has to preserve all the evidences of local stake holders meeting like intimation for the meeting given to the stake holders, photographs, attendance sheet of local stake holders etc. which is to be produced at the time of Validation.

Host Country Approval
Once preparation of all these documents are finished then PP can apply to the Ministry of Environment and Forest to get the consent for Host Government Approval (HCA). MoEF is constituted by the Central Government as National Clean Development Mechanism Authority (NCDMA). Once HCA is accorded to the project then PP can proceed further.

Engagement of a DOE
Project proponent has to engage a Designated Operational Entity (DOE) for the CDM project for validation purpose. DOE is the agency which is accredited by UNFCCC to check trust worthiness of the data by keeping in the view the information available in the PDD, during validation and Verification as well.

Global Stakeholder Consent
After primary validation DOE shall put PDD on UNFCCC's web site for a month's time for the Global Stake holder's consent. During web hosting, any person from any country can insert comments on the project, which PP/DOE has to suffice before registration.

Validation and Registration
Once webhosting is over, PP can proceed with validation process. In this process DOE will do site visit and check the correctness of the information provided in the PDD by PP. After site visit DOE may raise some queries based on the information and evidences shared with DOE at the time of site visit. After sufficing all queries, DOE will prepare a Validation report with positive or negative opinion on project and submit the report with UNFCCC. The CDM Executive Board (CDM - EB) will check all the evidences and go through validation opinion of DOE and conclude whether the project to be registered or rejected.  

Certified Emissions Reductions
Once project gets registered with UNFCCC, PP can go for verification for their emission reduction. Based on quantum of emission reduction, PP has flexibility to decide the schedule of verification period, which may be one year or more or less than one year. In verification process also, DOE will do site visit, wherein DOE will check all measuring parameters which are mentioned in PDD, will check trust worthiness of the logged parameters, regular calibration of instruments which are involved in measuring parameters and other related documents as felt necessary. DOE may raise queries after site visit, which PP has to suffice with all appropriate evidences. Finally DOE will prepare a verification report and submit them to the CDM - EB of UNFCCC after passing it through their own Technical Review (TR) team. This report is reviewed by EB and they may release CER based on the verification report and evidences provided to them. During every periodic verification same procedure is to be followed till the crediting period of the project.

CER Transaction
Once emission reduction is certified by CDM - EB then it becomes Certified Emission Reduction (CER), which PP can sell them to the emission trading market on current price of CER. Normally CER is traded in EURO. The procedure for crediting and transaction of CER is mainly as under.
 

• Payment of Share of proceed (SOP) to UNFCCC for Administration
•  Issuance of CER
•  Term sheet preparation
•  Enquiries to International Buyers
•  Receipt of Offer
•  Negotiations
•  Finalization of Bid
•  Signing of Emission Reduction Purchase Agreement (ERPA)
•  Transaction/Monetization of CER

GACL initiatives towards CDM
GACL is the first Public Sector Unit (PSU) in the country to get Host Government approval from MoEF for its identified CDM projects. The CDM projects which are currently registered with UNFCCC are as under.

•  Fuel switching from Naphtha to Natural Gas in 90 MW captive Power plant at Dahej Complex.
•  Efficient utilization of waste heat and Natural gas at Dahej.

Additional CDM Projects are 

• Steam generation from waste heat recovery boiler with hot gas of chloromethane in chloromethane plant at Vadodara.
•  Grid connected electricity generation from renewable energy source wind by installing 23.75 MW wind farm in Kuchchh district of Gujarat.
•  Grid connected electricity generation from renewable energy source of wind by installing 39 MW wind farm at Sinoi, Kutchh of Gujarat.

UNFCCC has awarded 0.4 million CERs to GACL so far and company has plans to increase this number to 2.0 million CERs for the entire crediting period of the projects.
The company has a well organized team headed by a very senior officer which interacts with technical team on regular basis and works on identifying the potential CDM projects. GACL further imports guidance to other PSU's in the state.
GACL stands committed to clean environment.

V.K.Gulati is Senior Executive Director (Commercial), Gujarat Alkalies & Chemicals Ltd. Email: vijay.gulati@gacl.co.in