Green mechanisms - there is no time to wait for perfect solutions


If there is to be any hope of limiting greenhouse gas emissions, efficient mechanisms for financing the introduction of new low-carbon technologies must be put in place quickly. One such financing element has now been tested over the past decade - the so-called flexible mechanisms under the Kyoto Protocol; Clean Development Mechanism (CDM) and Joint Implementation (JI). Like most practical solutions, these schemes are not without their defects and problems but they have also proven to be implementable in practice - and not least that they can be practical instruments on the road to better financing schemes. However, the public debate mainly focuses on the negative aspects of the schemes, and society risks throwing the baby out with the bath water if it does not also understand the past significance of these schemes and see the potential for their further use while also making improvements to them.

There is scientific evidence that we are in the process of entering a new geological era, characterised by our way of life and industrial activity mainly controlling the development and seriousness of changes to and effects on the environment and climate. The fact that these changes have been created by our activities can give us hope that it is in our power to stop the world changing. However, when we see how little the international community and some nations are able to agree on measures to reduce greenhouse gas emissions, then the outlook becomes more depressing.

Because the volume of greenhouse gas emissions is already too large for the earth's carbon cycle to stabilise the level of greenhouse gases in the atmosphere, emissions will have to be cut drastically. In today's situation, constant emissions at current levels will lead to a further increase in the CO2 concentration in the atmosphere. Most analyses conclude that emission reductions of around 80 per cent per annum are necessary if the CO2 concentration is to stop increasing.

Because the effect on the climate of the high concentration of CO2 in the atmosphere is so long-lasting, a new US report recently published by the National Academy of Science alleges that the earth's mean temperature will continue to rise for several hundred years after the concentration of climate gases has stabilised.

The models used in climate research contain several uncertainties and many mechanisms are not fully understood. However, we can observe with certainty that the concentration of carbon dioxide in the atmosphere has increased and is continuing to increase. This will very probably lead to the earth's climate changing and to the world's oceans becoming more acidic. Both these long-lasting changes may dramatically affect our descendants for many generations to come.

So we have no time to lose when it comes to reversing this trend. Private industry and public authorities must make more effort to reduce emissions. Since the Kyoto Protocol, mechanisms to reduce climate gas emissions have existed. However, the debate regarding these mechanisms is depressing - it focuses more on discrediting the schemes than on discussing how the existing mechanisms, such as the Clean Development Mechanism (CDM), can be improved.

This scheme means that industrialised countries and developing countries can collaborate on projects that contribute to sustainable developments in the developing country and also help to reduce the climate gas emissions of the country where the project is carried out. The investor country can use the emission reductions it achieves through such projects to satisfy some of its emission obligations under the Kyoto Protocol. Through this project-based scheme, private companies and organisation also gain opportunities by investing in CDM projects and thus contribute to a trend towards lower climate gas emissions.

Since the scheme was implemented, over 2,300 different CDM projects have been registered. By 2012 these projects are expected to result in about 1.2 Gt CO2 equivalent in emission reduction, which is around 30 times Norway's annual climate gas emissions.
CDM projects can be carried out within a large number of sectors, ranging from agriculture to the forestry, chemicals and energy industries. The latter industry has by far the most project registrations.

The size of the projects, calculated as the reduced emission of certified CO2 equivalents, varies from a few 10,000 tonnes of CO2 equivalents per annum to up to 10 million tonnes (N2O from the production of adipic acid in China). Especially the last category of projects - industrial gases that have a great heating potential such as laughing gas (N2O) are almost 300 times more potent as a climate gas than CO2 - have been criticised by many.

Laughing gas is a by-product of both adipic acid production and artificial fertiliser production. This gas, which used to be emitted straight into the atmosphere, can - following reasonably low investments and the modification of process plants - efficiently be converted into nitrogen and oxygen. Since there was no requirement that such emissions from factories had to be limited, however, no investments were made until it became possible to sell the reduced emissions as certified CO2 quotas. Now, more or less all major laughing gas emissions have been removed thanks to the CDM scheme in countries where the CDM acts as a financial incentive. Just one factory in China provides a reduction of around 20 per cent of Norway's annual emissions of CO2 equivalents.

The other large CDM project area is renewable energy - wind and hydro power. China, especially, has been skilled at attracting investments and having projects registered as CDM projects. To some extent perhaps too skilled, including in the view of the UN, which has accused China of altering subsidy schemes with the aim of getting CDM to take over providing incentives for further wind and hydro power developments. The big - and in many cases difficult and to some extent also quite hypothetical - question regarding the project's "additionality" is the main criterion for triggering approval as a CDM project. A project will not be registered as a CDM project if it would have been carried out irrespective of the future sale of quotas. From a climate point of view, wind power is a far better solution than continuing to develop coal power, and wind power can only theoretically compete in a market where there are alternatives such as coal-fired power plants and plenty of access to coal. Regarding the question of "additionality", considerable credit should be given to the fact that electricity from renewable sources is always a better solution for the climate than the fossil fuel alternative, and the global community should accept all good incentives to realise more such power.

We currently have mechanisms that can bring in private capital to cooperate with public authorities in combating increased greenhouse gas emissions. It is clear that these mechanisms can be improved and made more transparent and efficient. It will take 5-10 years before new schemes are efficient and functional, and no one knows what weaknesses such new mechanisms will have until they have been tried, in the way that the flexible Kyoto mechanisms have now been tested during the past decade. In our eagerness to find other solutions and not look at the positive results that the green mechanisms, like CDM, have led to, we are in danger of undermining one of the few measures that have been allowed to function over time and that developing countries have proven willing to start using to build new low-emission facilities. This is a scheme that should be expanded - not restricted. CO2 knows no boundaries and one tonne less in China means just as much to the climate as a one-tonne reduction in emissions in Norway.

Stein B Jensen is director of operation at risk management specialist DNV's Climate Change and Environmental Services division


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