The promotion of sustainable development in China through the optimization of a tax/subsidy plan among HFC and power generation CDM projects

China is expected to reach record growth by 2020 in the energy sector by at least doubling its electricity generation capacity. In order to protect the environment and foster economic development, China will greatly benefit from transfers of state-of-the-art power generation technologies through international agreements such as the Clean Development Mechanism (CDM). However, a buyer-driven carbon market and a highly competitive environment due to more cost-effective projects attribute to China's need to achieve a balance between sustainability and profitability for CDM projects implemented in China.     

Assessment of clean development mechanism potential of large-scale energy efficiency measures in heavy industries

This paper assesses clean development mechanism (CDM) potential of large-scale energy efficiency measures in selected heavy industries (iron and steel, cement, aluminium, pulp and paper, and ammonia) taking India and Brazil as examples of CDM project host countries. We have chosen two criteria for identification of the CDM potential of each energy efficiency measure: (i) emission reductions volume (in CO₂e) that can be expected from the measure and (ii) likelihood of the measure passing the additionality test of the CDM Executive Board (EB) when submitted as a proposed CDM project activity. The paper shows that the CDM potential of large-scale energy efficiency measures strongly depends on the project-specific and country-specific context. In particular, technologies for the iron and steel industry (coke dry quenching (CDQ), top pressure recovery turbine (TRT), and basic oxygen furnace (BOF) gas recovery), the aluminium industry (point feeder prebake (PFPB) smelter), and the pulp and paper industry (continuous digester technology) offer promising CDM potential.     

Enabling optimal energy options under the Clean Development Mechanism

This paper addresses the cost effectiveness of renewable energy technologies in achieving low abatement costs and promoting sustainable developments under the Clean Development Mechanism (CDM). According to the results of our optimal energy option's analysis, at project scale, compared with a diesel-only energy option, photovoltaic (PV)–diesel (PVDB), wind–diesel (WDB) and PV—wind–diesel (PVWDB) hybrids are very cost-effective energy options. Moreover, energy options with high levels of renewable energy, including 100% renewables, have the lowest net present cost and they are already cost effective without CDM. On the other hand, while the removal of about 87% carbon dioxide emissions could be achieved at negative cost, initial investment could increase by a factor of 40, which is one of the primary barriers hindering wider renewable energy applications in developing countries, among others. Thus, in order to increase developing countries’ participation in the carbon market, CDM policy should shift from a purely market-oriented approach to investigating how to facilitate renewable energy projects through barrier removal. Thus, we recommend that further research should focus on how to efficiently remove renewable energy implementation barriers as a means to improve developing countries’ participation in meaningful emission reduction while at the same time meeting the needs of sustainable economic development.     

Analysis of economic benefits and risks of energy storage project under financial leasing model

储能项目的经济性是制约储能项目商业化的重要因素之一。其中商业模式对项目经济性起着决定性作用。通过分析国内储能系统相关政策与发展现状,根据给定的储能项目系统结构与盈利方式,建立项目经济模型,通过内部收益率、投资回收期和发展成本等经济性指标评价了项目的经济性。进一步,以储能项目商业化融资难的问题为突破点,引入直接融资租赁模式,评估了在融资租赁公司低成本采购优势下项目的经济性。通过分析可知,融资租赁模式的引入可以缓解企业前几年的资金压力,提高项目的经济效益。     

后京都时代中国清洁发展机制项目的风险控制

清洁发展机制项目的开发、建设和运行,不仅受到各类宏观因素的影响,也会因为其申报流程的复杂性和工程项目建设运行的不确定性,而存在着各类风险。在对国内外清洁发展机制市场和政策现状进行分析的基础上,结合多个可再生能源清洁发展机制项目的实际操作经验,同时也结合最新市场动态和政策走向,对后京都时代中国可再生能源清洁发展机制项目在具体开发、建设及运行过程中的风险管理进行探讨,以期推动其能够平稳过渡和发展。     

发展中国家政府对国内CDM项目管理的经济手段

CDM是基于发达国家温室气体减排义务之上的发达国家和发展中国家合作机制。为了保障CDM项目能够产生实在的、可测量的、长期的效益及额外于任何其他项目的温室气体减排量,已经通过政治谈判建立了从CDM项目设计、国家批准、审查登记、项目监测、核实/认证、到签发核准的减排量(CERs)的管理框架和规则。然而,在如何使CDM项目的发达国家和发展中国家参与方能够公平地分享CDM项目所产生的经济利益方面,目前仍然存在很多问题有待于解决。发达国家强调CDM项目合作应该完全基于市场机制。但由于CDM的项目运作过程和项目所产生的交易品(CERs)与现有的国际贸易规则有很大的不同,完全基于市场机制和成本竞争将不利于保障发展中国家参与方的利益,因此发展中国家的政府有必要采用经济手段对本国境内实施的CDM项目进行一定的控制和干预。     

Can CDM bring technology transfer to China?—An empirical study of technology transfer in China’s CDM projects

China has undertaken the greatest number of projects and reported the largest emission reductions on the global clean development mechanism (CDM) market. As technology transfer (TT) was designed to play a key role for Annex II countries in achieving greenhouse gas emission reductions, this study examines various factors that have affected CDM and TT in China. The proportion of total income derived from the certified emissions reductions (CER) plays a key role in the project owners’ decision to adopt foreign technology. Incompatibility of CDM procedures with Chinese domestic procedures, technology diffusion (TD) effects, Chinese government policy and the role of carbon traders and CDM project consultants all contribute to the different degrees and forms of TT. International carbon traders and CDM consultants could play a larger role in TT in China's CDM projects as investors and brokers in the future.     

中国CDM项目提交注册阶段的常见审查问题分析与对策

随着我国清洁发展机制(CDM)项目活动的活跃,加之联合国CDM执行理事会(EB)对CDM项目的要求越来越严格,我国越来越多的CDM项目在提交注册阶段被要求审查。本文对我国CDM项目中在EB38次会议后被要求审查的基准收益率、投资分析、敏感性分析、普遍性分析、考虑CDM证据和废能回收利用项目的基准线情景选取等问题进行总结和分析,并探讨回答审查问题的相应对策及建议,为相关机构和项目业主回答EB的审查问题和以后更好地编写项目设计文件(PDD)提供帮助,以促进我国CDM项目开发进程。     

Extracting the resource rent from the CDM projects: Can the Chinese Government do better?

The revenue generated from a CDM project in China will be shared by the government and the project owner, and is also subject to the corporate income tax. This paper studies the impacts of the revenue sharing policy and income tax on the CDM market. The economic model presented in this paper shows that higher-cost CDM projects will be more affected by the CDM policies than lower-cost projects. In addition, the majority of CERs will be generated from lower-cost projects. This kind of distribution of CERs across different types of CDM projects, which is in line with the current picture of the CDM market in China, is not consistent with the goal of sustainable development. A simulation shows that a type-by-type tax/fee scheme would be more effective in assisting sustainable development than the current CDM policies. The study also suggests the government use negative tax/fee with the type-by-type scheme to subsidize the CDM projects that generate large sustainability benefits but would otherwise not be developed due to high costs. If all of the revenue from the CDM is recycled, it is estimated that CERs generation will increase by 98.28 MtC, mainly from the CDM projects that have substantial sustainability benefits for the host country.     

Russian energy efficiency projects: lessons learnt from Activities Implemented Jointly pilot phase

Russia needs to improve the efficiency of energy. Failure to do so will retard the economic recovery of the country, but the energy sector is lacking both domestic and foreign investments. JI projects could provide the underfinanced Russian energy sector with additional investments. AIJ pilot project experiences provide an overview of the potential difficulties for future JI projects. Institutional problems were the most important category. Most of these problems remain, and the lack of ratification of the Kyoto Protocol by Russia has formed a new very significant barrier. Implementation level problems caused some problems to AIJ projects, but they are likely to have less impact on the better prepared JI projects. The character of funding-related problems has changed: for AIJ projects the main problem was that emission reductions could not be credited, whereas future JI projects will experience more competition in the Kyoto market where the overall investment climate and the availability of local cofunding are more relevant. Therefore, the unfinished economic and energy sector reforms currently discourage JI investments. The project experiences so far have been dismal, and if Russian policy-makers cannot improve this performance, only few JI projects can be expected in the future.     

利用PCDM促进我国能源可持续发展

规划方案下的清洁发展机制（PCDM）的有效实施．将会对发展中国家的能源、经济和社会的可持续发展带来良好效益。除开发碳捕获与碳埋存技术之外,联合国气候框架公约执行理事会在我国电力行业其他减排领域均有相关的方法学,可以开发成CDM项目。目前我国已开发的CDM项目主要集巾在可再生能源领域巾的风电、水电、生物质发电方而。PCDM最适宜使用的是小型方法学。以宁夏丰联彭阳太阳灶项目为例．拟定项目基准线情形,计算出年减排量约为35723t二氧化碳当量。PCDM的实施仍存在其本身还不完善、尚无成功经验可借鉴、金融危机下国际碳交易市场萎缩等障碍。建议我国应完善CDM项目管理办法,鼓励多方协作开发PCDM,开发适合我国国情的方法学,积极参与国际PCDM规划的制定与简化。     

Explaining the differential distribution of Clean Development Mechanism projects across host countries

The Clean Development Mechanism (CDM) of the Kyoto Protocol represents an opportunity to involve all developing countries in the effort to reduce greenhouse gas emissions while also promoting sustainable development. To date, however, the majority of CDM projects have gone to emerging markets such as China, India, Brazil, and Mexico, while very few least developed countries have hosted projects. This paper investigates the differential distribution of CDM activities across countries. We develop a conceptual model for project profitability, which helps to identify potential country-level determinants of CDM activity. These potential determinants are employed as explanatory variables in regression analysis to explain the actual distribution of projects. Human capital and greenhouse gas emission levels influenced which countries have hosted projects and the amount of certified emission reductions (CER) created. Countries that offered growing markets for CDM co-products, such as electricity, were more likely to be CDM hosts, while economies with higher carbon intensity levels had greater CER production. These findings work against the least developed countries and help to explain their lack of CDM activity.     

Costs of certified emission reductions under the Clean Development Mechanism of the Kyoto Protocol

This paper examines the cost structure of certified emission reductions (CERs) through various types of projects under the Clean Development Mechanism (CDM) of the Kyoto Protocol. Using the CDM project data, the costs of CERs and their variation across technology and over time and space are estimated by applying alternative functional forms and specifications. Results show that the average cost of CERs decreases with the project scale and duration, scale and duration effects significantly vary across project types, and there is an upward trend in costs. The results also show that the distribution of the projects in the CDM portfolio or a given location does not strictly follow the relative cost structure, nor does the distribution of the CDM projects in different host countries follow the principle of comparative advantage. More than 84% of the CDM portfolio consists of various energy projects with substantially higher costs of CERs than afforestation and reforestation, industrial and landfill gas reduction, and methane avoidance projects, which are only 12% of all projects. While per unit cost of abatement plays an important role in the bottom-up and top-down models to evaluate emission reduction potential and analyze policy alternatives, the findings contradict the presumption of such models that project investors seek out low-cost opportunities. At the aggregate level, the cost of CER by the projects in Asia and Europe is similar but higher than those hosted in Africa, Americas, and Oceania. Yet more than 83% of the projects in the CDM portfolio are located in Asia; more than 69% of the projects are in China and India alone. China appears to have a comparative advantage (i.e., lowest opportunity cost) in energy efficiency projects, while India has a comparative advantage in hydro power projects and Brazil has a comparative advantage in wind power projects. In contrast, energy efficiency category accounts for only 8% of the CDM projects in China, hydro power accounts for 12% of the projects in India, and wind power accounts for 18% of the projects in Brazil. The results provide a basis for evaluating the incentives that the mechanism offers as a cost effective policy instrument that balances greenhouse gas mitigation across sectors and regions, while fulfilling the objective of the convention.     

Determinants of clean development mechanism activity: Evidence from China

As regards the dual goals of additionality and sustainability, some clean development mechanism (CDM) projects were successfully registered while some were rejected by the Executive Board (EB). This paper focuses on two final statuses of these projects and aims to explore the potential determinants of CDM activities. Based on the Chinese samples of the rejections and registrations, we find that (1) according to the financial barrier analysis with the internal rate of return without CDM, the additionality is the most important and robust rule of CDM activities and the CDM projects successfully registered are more additional than the rejected ones in China; (2) the sustainability is another important determinant of CDM activities in China and Chinese CDM activities are sustainable in terms of size, while the EB is criticized for its selection of unsustainable CDM projects in terms of cost-effectiveness on emission reductions within a long period or in terms of hydropower plants; (3) some other factors including the prices of sale electricity and certified emission reductions, the generating capacity and installed capacity all tend to pose significant impacts on the final status of each project that features the CDM activities in local areas of China.     

Promotion of energy conservation in developing countries through the combination of ESCO and CDM: A case study of introducing distributed energy resources into Chinese urban areas

The implementation of an energy service company (ESCO) project in developing countries may result not only in reduced energy cost but also in considerable environmental benefits, including the reduction of CO₂ emissions, which can be assessed in an economic manner under the Clean Development Mechanism (CDM) scheme. In this way, the economic and environmental benefits of energy conservation activities can be enjoyed by both the investor and the end-user, which can reduce the investment risk and realize a rational profit allocation. This study presents a numerical analysis of the introduction of distributed energy resources (DER) into a Chinese urban area. An optimization model is developed to determine the energy system combination under the constraints on the electrical and thermal balances and equipment availability. According to the simulation results, the introduction of DER systems possesses considerable potential to reduce CO₂ emissions, especially when considering that the economic profit of the CO₂ credit will increase the incentive to adopt DER systems to an even greater extent. Furthermore, by sharing the energy cost savings with the investors under an ESCO framework, the investment risk can be further reduced, and the conditions required for the project to qualify for CDM can be relaxed.     

Toward an effective implementation of clean development mechanism projects in China

With the already huge and growing amount of greenhouse gas emissions and a great deal of low-cost abatement options available, China is widely expected as the world's number one host country of clean development mechanism (CDM) projects. But, making this potential a reality represents a significant challenge for China, because there has been a general lack of awareness by both the Chinese government and business communities, clear institutional structure, and implementation strategy. This has raised great concern about China's ability to compete internationally for CDM projects and exploit fully its CDM potential.

This paper aims to address how CDM projects will be effectively implemented in China by examining the major CDM capacity building projects in China with bilateral and multilateral donors, the treatment of low-cost, non-priority CDM projects, and how a system for application, approval, and implementation of CDM projects is set up in China and what roles the main institutional actors are going to play in the system. We conclude that these capacity building assistances, the establishment of streamlined and transparent CDM procedures and sound governance, and the lessons learned and experience gained from the implementation of the CDM project in Inner Mongolia and the two Prototype Carbon Fund’ projects will help China to take advantage of CDM opportunities. Moreover, in order to further capitalize on its CDM potential, there is a pressing need for the Chinese government to amend its current interim CDM regulations, in particular those controversial provisions on the eligibility to participate in CDM projects in China and the distribution of the revenues derived from CDM project between the project developer and the Chinese government. We believe that taking these capacity building projects and the recommended actions to clearly define the sustainable development objective of the CDM and disseminate CDM knowledge to local authorities and project developers as sectorally and geographically wide as possible, addressing those controversial CDM provisions with clearer guidance, and gaining experience from real practice will reduce the perceived project risks and lower the barriers to CDM project development in China. This is, in turn, likely to lead a much greater percentage of carbon credits to come from CDM projects in China over the next several years.     

红庙岭生活垃圾填埋气体回收利用的CDM可行性研究

对国内几个已批准的填埋气体收集利用CDM项目，在比较分析的基础上，结合福州市红庙岭生活垃圾填埋场具体情况，对该场填埋气体回收利用的CDM可行性进行研究及效益评析。结果表明：只要尽快合理地开发该项目，不仅能大大减少填埋气体的排放量，同时也减排了因替代其它能源产生电能而带来的温室气体。因此，具有同类垃圾填埋场的城市也应通过国家相关部门积极申报填埋气体发电CDM项目。     

福州红庙岭生活垃圾填埋气体回收利用的CDM可行性研究

对国内几个已批准的填埋气体收集利用CDM项目,在比较分析的基础上,结合福州市红庙岭生活垃圾填埋场具体情况,对该场填埋气体回收利用的CDM可行性进行研究及效益评析。结果表明:只要尽快合理地开发该项目,不仅能大大减少填埋气体的排放量,同时也减排了因替代其它能源产生电能而带来的温室气体。因此,具有同类垃圾填埋场的城市也应通过国家相关部门积极申报填埋气体发电CDM项目。     

The importance of clean development mechanism for small hydro power plants

The present study sought to examine the importance of CDM for the implementation of small hydro in Brazil, assessing its advantages, disadvantages and limitations. An analysis of official documents of all SHPs in activity, under construction, and approved in Brazil was performed, including all existing CDM projects for small hydro in the country. A sensitivity analysis was performed to determine the point of zero net loss for CDM SHP projects, considering: minimum, maximum, and average Certified Emission Reduction (CER) values; minimum, maximum, and average costs of CDM project development, both for small and large scale activity; and variations in the internal rate of return (IRR). The main conclusion was that CDM for SHP in Brazil cannot be considered a subsidy for implementation of these projects, but may increase their revenue. It was found that, among the 431 SHPs which became active in the country since 2001, 339 did not implement CDM projects, suggesting that the importance of this mechanism as an incentive was uncertain. It was also found, under the investigated conditions, that investment in a CDM project requires a minimum installed capacity of approximately 11 MW to minimize the risks related to economic return. The variation in the value of the CER is more important than the variation of the Weighted Average Cost of Capital (WACC), as verified through sensitivity analysis. It was also found that CDM projects of large-scale activity, as well as small hydro projects in isolated systems, have a lower risk compared to small-scale projects which belong to the NIS (National Interconnected System).