India's Massive Supercritical Mega Coal Plant and China's Wind Farms get Rejected by stricter UN CDM panel for Carbon Credits Eligibility

I have written before that United Nation’s Clean Development Mechanism(CDM) leads to profiteering and in some cases Criminal Fraud.The Kyoto Protocol is an imperfect protocol to reduce carbon emissions through grant of money to carbon reducing projects in developing countries.This is implemented through CERs which are traded in the market and cost around 12-15 Euros.Companies in  in Europe and Japan buy these credits to stay within their carbon quotas mandated by their countries.Companies in  India and China have been the biggest beneficiaries accounting for nearly 80-90% of the the money granted through these scheme.Investment Banks have jumped into the fray of Carbon Trading and numerous Consultancies have opened to make money taking advantage of this tedious bureaucratic process.This has led to fears that a new Global agreement on Climate Change would be made into a new Profit Center by Investment Banks.Deutche Bank employees have already been convicted of a wide ranging multi nation Fraud.

UN Offsets Might Not Be Offsetting Much – Earth2Tech

The UN’s Clean Development Mechanism (CDM), a system whereby developed nations can earn certified carbon offset credits (CERs) by funding clean energy projects in the developing world, has come under fire again, this time from two separate reports. Both accuse the CDM of not adequately verifying that their credits are indeed being awarded to programs that would have otherwise not happened, an issue known as “additionality.”

David Victor and Michael Wara, two senior Stanford University academics, looked at thousands of offset projects and determined that anywhere from a third to two-thirds of the credits don’t actually represent emissions cuts. Meanwhile, U.S. watchdog group International Rivers has released a report claiming that nearly three-quarters of CDM offsets recipients had completed their project by the time they were approved, which the report’s authors say proves that the offsets were hardly an impetus for the project.

“Judging additionality has turned out to be unknowable and unworkable,” Patrick McCully, director of International Rivers, told the Guardian. “It can never be proved definitively that if a developer or factory owner did not get offset income they would not build their project.”

The Stanford researchers also noted that the developed world is footing the bill for programs the UN is approving, many of which are necessary infrastructure projects, not specifically carbon abatement projects. The Stanford pair found in their research that nearly every new hydro, wind and natural gas-fired plant planned for construction in China in the next fews years is applying for CDM credits. “Rich countries are clearly overpaying by a massive amount,” Victor said.

China’s Wind Farms get Rejected by Stricter CDM Board

UN’s CDM panel which decides on the eligibility of projects under this scheme has come under criticism for being too lenient in approving projects.It has been said that these projects sometimes lead to more emissions defeating the very purpose of this scheme.The Panel has become more discerning and has rejected around 50 Wind Projects in China because they were thought to be profitable even without these credits.Wind Energy has become competitive with Fossil Fuels in recent times and with subsidies from different countries.The Wind Projects were rejected because it was alleged that domestic subsidies were reduced for these projects by the government in order for them to claim the Carbon Credits from the UN.Unsurprisingly,China’s companies have vehemently protested against this move.Longyuan Group which is the biggest Wind Farm Operator in China was behind 5 of these projects.

UN and China Squabble over Wind Subsidies – Businessweek

The Financial Times reports today that the UN’s Clean Development Mechanism (CDM) board, which is in charge of allocating carbon credits, “has suspended approvals for dozens of Chinese wind farms” because the board believes the government has cut back on subsidies to developers in order to qualify for carbon credits.

The concern is the Chinese are gaming the system, earning valuable carbon credits for wind-farm developers (credits that developers can sell on the open market) who don’t need the UN’s help because Beijing would have been giving them subsidies anyway to make sure the projects get built.

India’s Supercritical Mega Coal Plant also gets Turned Down by UN

India suffers from chronic Power Shortage as its Energy Supply fails to keep up with the rapidly growing Economy.Privatization of the Electricity Generation in India has seen large number of companies entering the Power Sector.A lot of the power projects being built are based on Coal as Fuel.These massive 4 GW size plants are using “Supercritical Boiler” Technology which is more Energy Efficient than the older coal fired plants in India.India’s large corporate houses like Reliance,Tatas and Adanis are building a number of these plants.Some of these Mega Coal Plants are facing Environmental Protests due to Destruction of Ecology and livelihood displacement of farmers.Now comes Another Jolt for these Coal Plants.The United Nations has rejected Carbon Credit Eligibility for a 4000 MW Coal plant being built by the Tatas  in the western state of Gujarat.A Similar size plant built by Adanis had got approval in December of 2009.So this comes as a surprise for India’s Power Companies as these CERs were projected to bring millions of dollars in revenue (pure profits in fact).The reasons given was that the plant’s ROE was not dependent of Carbon Revenues.This makes sense because half of the plant is already constructed and according to analysts the project would continue even with the rejection.A recent study has shown that the program is ineffective and most of the projects would be built anyway with or without these carbon credits.While UN has said that it does not represent a rejection of all Supercritical Coal Power Plants,it seems unlikely that any future coal plant will get Carbon Credits.

Analysis: India plant’s carbon status denial upsets investors – Reuters

A U.N. carbon credit scheme’s rejection of a huge Indian coal power plant deprives the project of revenue running into hundreds of millions of euros and rings alarm bells for investors developing similar plants.The incident spotlights a controversial U.N. process that allows valuable carbon offsets to be given to highly efficient coal power stations, a step green groups say erodes the spirit of trying to wean developing nations off polluting fossil fuels.

In India’s western state of Gujarat, Tata Power has completed more than half of its $4.2-billion 4,000-MW plant that will use more efficient supercritical boiler technology to cut carbon emissions and reduce coal consumption.With its project backed by nearly $1 billion in debt financing by the World Bank’s IFC finance arm and the Asian Development Bank, Tata had been hoping to earn carbon credits under a U.N. scheme that rewards investments in cleaner energy.

But late in July, the panel for the U.N.’s Clean Development Mechanism rejected Tata’s application, saying it had not shown CDM revenues were critical to the project’s return on equity.

“The carbon crediting probably was not factored in at the time of the bid,” said one analyst, adding that estimates would not have considered such credits ahead of U.N. project approval.Although such revenue could be material to investment returns, another analyst said, his model did not take any into consideration. “We’ve always seen that as quite blue sky.”Underscoring green groups’ concerns over the need for carbon funding, a third analyst said, “These projects have to go ahead anyway — whether the carbon revenues are there or not.”The analysts asked not to be identified as their employers bar them from discussing individual projects.

Some analysts say the Tata rejection could end CDM approval for supercritical coal plants, but the U.N. disagreed.”Project activities that fail the additionality criterion are not registered by the Board,” a U.N. spokeswoman said, referring to the need to link project viability to CER sales.”However, it is important to underline that projects are considered on a case-by-case basis.”