The Climate Control Strategies GmbH implements since June 2010 a total of 2 CDM projects in two cement plants in Lao PDR. 75,000 tons of carbon dioxide emissions are saved each year by the partial replacement of mineral coal by biomass/waste in the combustion process of the cement works.
CDM is a relevant topic for all the companies with efficient, which are involved with innovative and/or emission-reducing technologies. This is true for technology providers and project developers, as well as for investors and lenders. Firstly, the relevance is independent of whether a company itself is involved in the EU emission trading or not. Secondly, the participation in a CDM project by way of purchase of emission reduction credits is at issue in particular for those companies, which are subject to the emission limits via the EU emission trading. Figure 1 shows the possible participants and their role in the context of a CDM project.
In Germany, approximately 450 companies with 1,942 plants are affected by the EU emission trading. During the period from 2008 to 2012, these companies will be granted emission allowances, totaling nearly 388.6 million tons of CO2 a year. From 2012, the air traffic will be included in the European emission trading and from 2013 other sectors will be included as well. Moreover, from 2013, other greenhouse gases will be added to the hitherto defined greenhouse gas CO2. Therefore, as from 2012 the number of affected enterprises and plants that are affected will increase significantly. For the third trading period (2013 to 2020) the proportional allocation amount will reduce, since the European Commission has set a reduction target of 20 percent by the year 2020. By 30 June 2010, the European Commission publishes the absolute quantity of allowances for the whole Community for 2013 and by 30 September 2010 the allocation amounts.
The CDM is of particular interest to those companies which want to open up export markets in emerging and developing countries. It is possible to co-finance emission reductions in developed countries and Eastern European countries in a similar way via the JI mechanism. According to the current state of affairs, the issuance of CO2 certificates for JI projects is only possible until 31 December 2012, since the Kyoto Protocol expires at that date. However, it is expected that the JI projects will continue, on the basis of a successor agreement.
The possibility to implement or t o participate in CDM projects, is available on one hand for companies which have to participate in the EU emission trading, but on the other hand also for all the natural and legal persons under private and public law (see definition of project initiator in § 2 No. 11 Project Mechanisms Act - Pro MechG). Generally, CDM offers a range of opportunities for companies:
Even at an early stage of the project, during which no emission reduction credits were actually generated, it is possible to already secure some revenues. This can be done through the sale of future emission reduction credits (forward), i.e. the project initiator assures the buyer of the supply a certain quantity of CERs at a certain price and at a later point in time. For delivery in 2012, the prices lie in the order of 8 to 11 € / CER-forward. The higher the risk for the buyer, the lower the prices.
Once emission reduction credits have been issued, they can be sold via the spot market. Spot trading is a short-term business, where the physical delivery of emission allowances takes place within a period of one to two days. From November 2009 to March 2010, on the Munich Stock Exchange (www.greenmarket-exchange.com) and the EEX in Leipzig (www.eex.de) the prices for EUAs varied between 12 and 15 € and for CERs between 11 and 14 € .
CDM projects can be implemented in each country, which is not listed in Appendix I of the United Nations Framework Convention on Climate Change (the so-called non-Appendix I countries, see http://unfccc.int/ essential_background/convention/background/items/2853.php) and which has ratified the Kyoto Protocol (http://unfccc.int/kyoto_protocol/status_of_ratification/items/2613.php).
However, the state may, at its own discretion exclude certain types of projects or even rule out the CDM in general.
The national CDM regulations should be verified in an early stage of the project cycle. The relevant competent national authorities are appropriate points of contact (see cdm.unfccc.int/DNA/index.html).
Until March 2010, most of the CDM projects were registered in Asia (75 percent). Another large part of the registered projects is to be related to Latin America and the Caribbean (22 percent).
The reasons for these regional focal points, apart from the large emission reduction potentials that can be realized, is mainly the high institutional development as regards the CDM. Whereas Africa (2 percent) lacks both factors, mainly because of the limited economic development. Although the competent state institutions for the implementation of CDM projects do exist partially, the situation is challenging because of the competence shifts of the authorities or because of the inexperience of the project partner . The situation is for project sites in the Alliance of Small Island States is similar. As regards Europe, Bosnia-Herzegovina, Malta, Macedonia, Moldova, Montenegro, Serbia and Cyprus offer opportunities as host countries for CDM projects. The European countries are also suitable as JI host countries. Countries, which haven't ratified the Kyoto protocol, can not be qualified as a JI or as a CDM host country (for instance the USA, status of March 2010).
The largest part of registered projects are located in China (36 percent) and India (34 percent), followed by Brazil (8.2 percent) and Mexico (5.8 percent). All these countries are emerging economies with a relatively high level of industrialization. The main objectives for these host countries, apart from supporting their economic development, is their participation and involvement in an international environment policy. The project process and the criteria are clearly structured in these countries, which simplifies the entire project implementation. These four countries discerned the potentials of the projects at an early stage and use the opportunities of the CDM effectively.
China is clearly the leader as regards the annual reduction amounts (59 percent). This is because of the large reduction potentials (see also FAQ 10) in the field of production and use of HFCs and SF 6 as well as from N2O process emissions. Other large reduction amounts stem from projects in India (12 percent) and Brazil (6 percent). Only about 2.7 percent of the reduction results from the implementation of projects in Mexico.
