Chinese renewable firms vent anger at UN over CDM rejections

The executive board running the UN's Clean Development Mechanism (CDM) offsetting scheme has come under fire from the Chinese developers of rejected wind and hydropower projects for allegedly moving the goalposts and setting unrealistic standards for emission-reduction projects.

Developers behind 19 Chinese wind and hydropower projects recently rejected for inclusion in the CDM by a UN-backed panel have accused the board of making arbitrary and non-transparent rule changes.

The CDM encourages investors from industrialised countries to fund emission reduction projects in the developing world by allowing developers of approved projects to sell carbon credits known as certified emission reductions (CERs). The CERs can then be traded or used to comply with binding Kyoto Protocol emissions targets in rich nations.

The group of Chinese developers said that they had been forced to reapply for CDM approval in an attempt to prove that they needed to issue and sell CERs in order to make their projects viable. But even after revisions, none of the 19 applications were successful.

The CDM has received significant criticism from project developers, who argue that the paperwork required to join the scheme is too onerous and costly for smaller projects.

A manager at one of the rejected projects, the Mudanjiang Xiaoguokui wind power plant in northeast China's Heilongjiang province, told news agency Reuters that the executive board (EB) had moved the goalposts. "The EB has changed the rules and we didn't know about that when the projects were first proposed," he said.

But Lucy Deng, technical manager in charge of CDM accreditation with auditors Det Norske Veritas in Beijing, said many of the problems were a matter of bad timing.

"The EB issued an information note saying that if the tariffs for wind and hydro projects in certain provinces exceeded its new benchmark they would be rejected," Deng said. “We actually cancelled a number of projects when we knew of the decision, but the rejected ones were submitted before the information note was issued."

China has produced more than half of the CERs generated so far by the scheme, but Chinese applicants have been accused of flooding the market with cheap and dubious credits from projects that do little to reduce carbon emissions.

There have also been accusations that some developers have deliberately under-reported the level of tariffs paid for renewable power in order to pass the CDM's tough additionality test, which is designed to ensure that projects genuinely require revenue from CERs to go ahead.

The executive board has been under pressure to get tough on so-called sub-prime carbon.

Earlier this week, the UN panel responsible for the (CDM) announced plans to step up its investigation into claims that some companies are deliberately increasing greenhouse gas emissions in an attempt to exploit a loophole in the carbon offsetting scheme.

The move follows a recent report from lobby group CDM Watch, which accused some firms of "gaming" the CDM system and deliberately increasing emissions of HCFC-22 and HFC-23 gases in order to earn additional Certified Emissions Reductions (CERs) carbon credits.