Clean Development Mechanism (CDM) and its status in Bangladesh
Tuesday, 14 December 2010
Clean development mechanism is one of the market mechanisms of the Kyoto Protocol to trade green house gas (GHG) emission from the less polluter countries to polluter countries after reduction through an approved project of the United Nations agency. It has been planned to benefit the countries like Bangladesh to get financing and clean and energy efficient technology transfer for economic development of the less imfortunate countries. Bangladesh's opportunity from this market mechanism has been huge from the point of its vulnerability to climate change and its huge resources to reduce emission of six GHGs.
Despite the potential, the country has not been able to extract the benefit of CDM for various reasons. With only two approved CDM projects since 2006/8, it has been stuck into the entry process to get approval from the UN Framework convention on climate change (UNFCCC)l. Failing to overcome many challenges the country remains far behind in the race of earning carbon credit from the developed countries whereas some Asian countries have performed well to dominate the market.
What is Clean Development Mechanism (CDM)?
CDM was devised to help the developed countries of Kyoyo Protocol meet their Green House Gas (GHG) emission reduction targets in a cost-effective manner, by allowing them to acquire certified emission reductions (CERs) from abatement projects in developing countries. Apart from having global benefits, CDM projects should also promote sustainable development in developing countries.
According to Article 12 of the Kyoto Protocol, the "purpose of the Clean Development Mechanism shall be to assist Parties not included in developed nations in achieving sustainable development, and in contributing to the ultimate objective of the Convention, and to assist Parties included in developed countries (Annex I) in achieving compliance with their quantified emission limitation and reduction commitments under Article 3".
Highly innovative, the CDM has the potential to meet the needs of both developing and industrialised countries. It could help solve developing countries' capital needs for the financing of technology transfer for clean, energy-efficient economic development, and for addressing environmental issues such as loss of biodiversity. It could also provide a lower-cost and more flexible alternative for developed countries to meet emissions reduction targets.
The CDM aims to direct mainly private-sector investment into emission reduction projects in developing countries while promoting sustainable development in these countries. In return, the developed countries receive credits against their Kyoto targets. CDM projects that reduce emissions of green house gases will create Certified Emission Reductions (CERs) which can then be used by developed countries parties (and their private entities) in greenhouse gas reduction projects, as well as to facilitate the transfer of new technologies that reduce green house gas (GHG) emissions in developing countries.
How Does CDM Work?
CDM enables developing country entrepreneurs and others to get investment fund for doing projects, which reduce GHG/s. Two things are important in CDM - namely the project proponent must prove that the activity (hence the GHG reduction) would not have occurred in the absence of the project and it promotes sustainable development.
Figure 1 illustrates how CDM works. From developed countries there is a flow of finance either up front or from annual sale of CERs. In return, developing countries will reduce a certain quantity of GHG, which will flow to developed countries as CERs after approval by the Executive Board of the UNFCCC. Whether or not a project is actually reducing GHG is to be verified by an auditor like firm known in the Kyoto Protocol as Operational Entity (OE). The OE also has the responsibility to validate the baseline, i.e., establish the GHG emissions that would have occurred without the CDM project.
Salient Features of CDM
l Industrialised (Annex-1) countries' state or private companies can invest in projects in developing (Non-Annex 1) countries that contribute to reduction of GHG emission.
l Developing (Non-Annex B) countries' state or private companies are allowed to implement such projects.
l Through CDM projects, industries in developing countries can be technologically upgraded and made environmentally-friendly, thus contributing to global climate protection as well as promoting sustainable development in the host country.
l Furthering their emission commitment, the industrialised countries' investing entities can earn credit for emission reductions achieved through their investment in the developing country.
Who is a Seller and Buyers of CERs and VERs?
Seller of an emission reduction is one who has exceeded his regulated or voluntary emission reduction requirement, or is in possession of unused, banked or traded emission reductions, and is looking to sell these quantified emission reductions. The emission reduction must be real, surplus, quantifiable and verifiable. All developing countries under the Kyoto Protocol can be a seller of CERs/VERs.
The buyer of emission reductions is a party who has to meet a regulated or voluntary reduction in emission. A buyer can also be an investor who believes that the value of emission reductions will increase with time. An emission reduction can, subject to trading system, be bought, held (banked) and traded (sold) by anybody and at almost anytime. Annex-B countries under the Kyoto Protocol are Buyer of CERs.
Project activities that meet all the CDM requirements, were initiated after January 1, 2000, and that are registered with the CDM Executive Board under UNFCCC are eligible for crediting after validation by a recognised operational entity (OT).
Emission reductions can be claimed for a maximum period of ten years without revision of the project baseline, or for a period of seven years with two extensions of seven years each, provided the project baseline is revised at the time of each extension.
CERs earned from CDM projects are a marketable commodity that may be exchanged with other companies or governments. A company that has earned CERs may also choose to bank them in order to be traded in future commitment periods after 2012. This is useful if the company does not require the credits in the current period and anticipates an increase in their market value.
Global scenario of CDM projects
Out of 2270 registered projects through CDM executive board, 1283 are large scale and the rest (987) are small scale. Asia and the Pacific countries possess the largest share of registered projects - around 1745 (76.77%); second highest are the Latin American and the Caribbean countries with 470 projects (20.68%). Africa holds the third position with 45 projects (1.98%) and the rest comprise 13 registered projects (0.57%).
In the Asia Pacific region, China and India are dominating in numbers of CDM registered projects and so far they have 887 and 515 registered projects respectively. In such a scenario, Bangladesh has only two projects (both developed by Waste Concern) -- one already operational in Dhaka and the other (from landfill gas to electricity generation) facing circumstances beyond the control of Waste Concern to implement.
Global carbon market and what is the present market price of CERs and VERs
There are two major options possible for harnessing the carbon market. One is CER under the CDM and another Verified Emission Reduction (VER) under the voluntary market. CER is compliance markets and VER voluntary markets. Both are expressed in tones of carbon dioxide (CO2) equivalents. The current market price of emission reduction credits in existing carbon markets is between US $19 and US $22 per ton of carbon dioxide for CERs, while the price for VERs is between US $8 and US $10 for VERs.
Market share of CDM projects
In 2005, the total global market of carbon trading was US$ 10.864 billion, out of which the CDM market share was only US$ 2.638. The volume of CER in 2005 was 710 million tons of CO2 equivalents with a price of US$ 7.5 per ton CO2 equivalent. In the year 2009, the total carbon trading market was US$ 116 billion, out of which the CDM market was US$ 25 billion with sales price of US $ 19 per ton.
How CDM can assist the private and public sectors in developing countries?
Developing countries in the process of achieving faster economic growth often have to settle for inferior technologies. These technologies more often than not consume more energy than state-of-the-art or advanced technologies. CDM allows a more energy efficient (or less GHG emitting) technology to be installed resulting in cost savings. It complies easily with the Department of Environment's regulations, ensure setting up a safer and cleaner plant and contribute to national sustainable development and to global environmental protection.
Companies of (Annex-1) developed countries participating in the CDM project will obtain the CERs to meet their domestic emission reduction targets in an economically efficient manner. However, companies from developing countries that have no requirement to reduce GHG emissions may also choose to gain ownership of CERs through the CDM at a low price to sell in the international market at a future date.
A Company (Annex 1 country) participating in the CDM project can finance a project in a developing country (Non-Annex-1 countries) by using any one of the following options:
l Full or Partial Equity: A company finances all or part of a CDM project in return for full or shared financial return and CERs.
l Financial Contribution: A company financially contributes towards the cost of a CDM project equal to some portion of the incremental cost of the project over and above the baseline technology, or finances the removal of market barriers, in return of the CERs.
l Loan: A company provides loan or lease financing at concessional rates in return for CERs.
lCER Purchase Agreement: A company agrees to buy CERs as they are produced by the project.
In most cases, however, CDM would help to finance the incremental cost of the project or might provide financing to remove market barriers to make the project financially viable.
The government of Bangladesh's response regarding CDM
In order to participate in the Kyoto Protocol's CDM process for generating CER, the Government of Bangladesh has set up a two tier Designated National Authority (DNA) through a government Notification on 13-10-2003. The lower tier, located at the Ministry of Environment and Forests (MoEF), is the secretariat or operational body of the DNA. It was to set up to perform all CDM related activities including giving preliminary approval of CDM projects through the CDM Committee. The upper tier, known as the CDM Board, gives the final endorsement of the approved projects. The Principal Secretary to the Prime Minister heads the CDM Board with the consideration that the designated person has jurisdiction over all secretaries of different ministries of the government, which may help achieve inter-ministerial coordination easily.
The main task of the DNA is to approve CDM projects, which can eventually be registered by the CDM Executive Board of the UNFCCC. As per the Modalities and Procedures of CDM, approval by the DNA is mandatory before project validation by any Designated Operational Entity (DoE) and subsequent registration by the Executive Board of the CDM.
Apart from establishment of DNA, the government has also established national procedures for evaluation and approval of CDM projects and developed sustainable development criteria for the evaluation of CDM projects.
Current status of CDM projects in Bangladesh
Being responsible for Climate Change related activities, the Department of Environment (under the MoEF) is fully aware of the CDM but its concept and scope were, however, not well understood by business communities and policy planners. Due to the reason, some of highly potential projects have been skidded away from the hands of the country like converting thousands autorickshaws to compressed natural gas vehicles. Many projects have also been underway individually which the experts say play role in damaging baseline of GHG emission status of the country.
It can be seen that the DNA of Bangladesh approved eight projects, out of which only two projects have successfully registered with the UNFCCC to claim carbon credits. Among the others, only one is able to go for expensive validation process. When scores of CDM projects are formulated in a year in the countries like China and India, Bangladesh could do only eight during the last five/six years.
Potential sectors for CDM in Bangladesh
Though the first two registered CDM projects were planned to reduce methane gas in waste sectors which is more than 20 per cent valuable than CO2 gas. Within 700 tons of kitchen market waste and municipality dumpsite, the two projects were supposed to reduce 487, 506 tons and 990,000 tons of GHG over an eight year period. Even the country's potential has been assumed ample in eight sectors. It should be emphasised that these are near term opportunities. With an increase in the carbon price and/or breakthrough in new technologies like
Solar cells, fuel cells, biomass gasification, etc., newer options will emerge.
a) Methane recovery from landfill with or without power generation
Of these seven categories, recovery of Landfill Gas has the most potential. From an environmental perspective, the outskirts of all major cities are becoming severely hazardous areas due to open and haphazard dumping of urban solid wastes. The recovery of landfill gas has been shown to be financially very profitable because the CDM financing amounts to more than 150% of the investment. If a portion of the benefits of the CDM project can be channeled to convert these dumps into sanitary landfills, the country will benefit tremendously because the municipal corporations simply do not have the money to upgrade the existing landfills. Moreover, electricity can be generated from methane recovered from the landfills.
b) Composting of urban
solid waste
Composting of urban solid waste has also been shown to be a viable CDM project. Positive aspects include the output from the composting plants representing a saleable product, and the prevention of landfill gas emissions that would otherwise have occurred.
c) Biogas from a wide variety of wastes
Biogas production from the five categories of waste mentioned above can not only give the
business enterprise a fuel to replace their present fossil fuel use, but also tackle their aggravating environmental concerns.
d) Solar home systems in off grid areas
Of all the renewable energy options for Bangladesh, solar photovoltaic has been identified by various independent sources as a potential area for CDM projects. The prospects for wind, minimicro hydro plant based biomass technologies have been shown to have limited prospects. With regards to wind and hydro projects, it is important to add that the potential has not been mapped to any extent to be able to outright dismiss these. It must always be remembered that in all countries of the world there will always be some prospects for these technologies. The prospect for plant-based biomass (husk, straw) is also limited because these products all have preset uses. Moreover, removing these free or cheap sources of fuel from the rural poor may have other consequences like loss of soil quality and deforestation. Solar Home Systems (SHS) can have a tremendous potential because even in the best scenario, in the next twenty years 20% of the area of Bangladesh will remain outside the grid. Due to increasing prosperity and widespread availability of electronic entertainment (television, radio, music systems) and communication conveniences (mobile telephone), there is increasing demand for electricity in all places of Bangladesh. It must be appreciated that 20% of the households represent nearly 5 million homes; 20% of that is a million homes. The present SHS dissemination programme has achieved only 50,000 or so units.
e) Efficient lamps to replace incandescent light bulbs
The prospect of efficient lighting comes about from the fact that nearly 25% of the total demand for electricity in the country is lighting. This is easy to appreciate because the combined demand for the households and commercial sectors is more than the industrial sector, and even in the industrial sector, there is a considerable amount of lighting load. The huge lighting demand creates a huge peak demand during the evening hours. This is causing the utility great difficulties because they have to operate expensive peaking plans. In reality, the utility cannot deliver the peak load and as much as 20% of the highest peaks during the year are managed by load shedding. The rural load is predominantly lighting using incandescent light bulbs. Through a suitably designed dissemination programme, the use of CFLs can reduce emissions significantly and in the process reduce the peak demand. An innovatively designed CDM project can certainly have an impact in this area.
f) Efficient brick manufacturing
The production process of bricks in Bangladesh uses crude inefficient technologies and coal as their fuel. Over 90% of the bricks are manufactured in this manner. The emission from
a brickfield constitutes more than 10% of the total GHG emission from the energy sector. Use of efficient technology, retrofitting the existing technology and fuel switching from coal to natural gas can have a big impact on GHG emission.
g) Sugar cogeneration
Sugar cogeneration is a well-known GHG emission option. The 20 sugar mills in the country
can be potential candidates for this technology. The only drawback is that all these mills are
public sector entities and are losing concerns. If those challenges can be tackled, then CDM projects can be initiated in this sub-sector.
Support required for Bangladesh to speed up the process of CDM project formation
Despite all these opportinuties, the country is yet to develop capacity of DNA and research on baseline data collection, both are important to formulate accurate projects without delay. Since CDM involves complicated project development, it is limited within a few organizations. For efficient CDM operations, capacity development of the both government and non-government members of the CDM Committee is necessary. Lending institutions and selected civil society groups are to develop along with public and private sector enterprises where CDM projects can be developed. Besides, NGOs are to be involved to execute CDM projects in the rural areas, especially those having adaptation co-benefits
Beside, the country has data thirst to show baseline of pollution in most of the sectors. Some of the recent studies regarding CDM have generated some data, but that is extremely specific and applies to only the project being developed. Usable data for developing CDM projects in Bangladesh is very limited. As such, effort towards baseline data collection should be given priority in order to develop CDM projects in Bangladesh.
Current Issues In Carbon Market Development in Bangladesh
l With the exception of waste projects, maximum 30% of the investment can be covered by CERs. There is a need for local financing in order to match the remaining 70% of the investment. With the current interest rate of commercial banks, many projects seem difficult to realise or IRR becomes unattractive. there is a problem of clear-cut baseline identification for many management projects. Low level of awareness amongst the financial and private sectors regarding CDM opportunities needs to be removed. Many energy and waste sector CDM projects require a bundling approach to get CER benefit in big quantity. Identification of the appropriate institution for bundling of the projects is in some instances a large barrier towards implementation of the projects. In order to encourage CDM investment, one-stop approval process for CDM projects involving CDM/Board of Investment, Bangladesh Bank and line ministries should be put in place.
.................................................................
The writers are the co-founders of Waste Concern and can be reached office@wasteconcern.org. Official website of Waste Concern: www.wasteconcern.org
Despite the potential, the country has not been able to extract the benefit of CDM for various reasons. With only two approved CDM projects since 2006/8, it has been stuck into the entry process to get approval from the UN Framework convention on climate change (UNFCCC)l. Failing to overcome many challenges the country remains far behind in the race of earning carbon credit from the developed countries whereas some Asian countries have performed well to dominate the market.
What is Clean Development Mechanism (CDM)?
CDM was devised to help the developed countries of Kyoyo Protocol meet their Green House Gas (GHG) emission reduction targets in a cost-effective manner, by allowing them to acquire certified emission reductions (CERs) from abatement projects in developing countries. Apart from having global benefits, CDM projects should also promote sustainable development in developing countries.
According to Article 12 of the Kyoto Protocol, the "purpose of the Clean Development Mechanism shall be to assist Parties not included in developed nations in achieving sustainable development, and in contributing to the ultimate objective of the Convention, and to assist Parties included in developed countries (Annex I) in achieving compliance with their quantified emission limitation and reduction commitments under Article 3".
Highly innovative, the CDM has the potential to meet the needs of both developing and industrialised countries. It could help solve developing countries' capital needs for the financing of technology transfer for clean, energy-efficient economic development, and for addressing environmental issues such as loss of biodiversity. It could also provide a lower-cost and more flexible alternative for developed countries to meet emissions reduction targets.
The CDM aims to direct mainly private-sector investment into emission reduction projects in developing countries while promoting sustainable development in these countries. In return, the developed countries receive credits against their Kyoto targets. CDM projects that reduce emissions of green house gases will create Certified Emission Reductions (CERs) which can then be used by developed countries parties (and their private entities) in greenhouse gas reduction projects, as well as to facilitate the transfer of new technologies that reduce green house gas (GHG) emissions in developing countries.
How Does CDM Work?
CDM enables developing country entrepreneurs and others to get investment fund for doing projects, which reduce GHG/s. Two things are important in CDM - namely the project proponent must prove that the activity (hence the GHG reduction) would not have occurred in the absence of the project and it promotes sustainable development.
Figure 1 illustrates how CDM works. From developed countries there is a flow of finance either up front or from annual sale of CERs. In return, developing countries will reduce a certain quantity of GHG, which will flow to developed countries as CERs after approval by the Executive Board of the UNFCCC. Whether or not a project is actually reducing GHG is to be verified by an auditor like firm known in the Kyoto Protocol as Operational Entity (OE). The OE also has the responsibility to validate the baseline, i.e., establish the GHG emissions that would have occurred without the CDM project.
Salient Features of CDM
l Industrialised (Annex-1) countries' state or private companies can invest in projects in developing (Non-Annex 1) countries that contribute to reduction of GHG emission.
l Developing (Non-Annex B) countries' state or private companies are allowed to implement such projects.
l Through CDM projects, industries in developing countries can be technologically upgraded and made environmentally-friendly, thus contributing to global climate protection as well as promoting sustainable development in the host country.
l Furthering their emission commitment, the industrialised countries' investing entities can earn credit for emission reductions achieved through their investment in the developing country.
Who is a Seller and Buyers of CERs and VERs?
Seller of an emission reduction is one who has exceeded his regulated or voluntary emission reduction requirement, or is in possession of unused, banked or traded emission reductions, and is looking to sell these quantified emission reductions. The emission reduction must be real, surplus, quantifiable and verifiable. All developing countries under the Kyoto Protocol can be a seller of CERs/VERs.
The buyer of emission reductions is a party who has to meet a regulated or voluntary reduction in emission. A buyer can also be an investor who believes that the value of emission reductions will increase with time. An emission reduction can, subject to trading system, be bought, held (banked) and traded (sold) by anybody and at almost anytime. Annex-B countries under the Kyoto Protocol are Buyer of CERs.
Project activities that meet all the CDM requirements, were initiated after January 1, 2000, and that are registered with the CDM Executive Board under UNFCCC are eligible for crediting after validation by a recognised operational entity (OT).
Emission reductions can be claimed for a maximum period of ten years without revision of the project baseline, or for a period of seven years with two extensions of seven years each, provided the project baseline is revised at the time of each extension.
CERs earned from CDM projects are a marketable commodity that may be exchanged with other companies or governments. A company that has earned CERs may also choose to bank them in order to be traded in future commitment periods after 2012. This is useful if the company does not require the credits in the current period and anticipates an increase in their market value.
Global scenario of CDM projects
Out of 2270 registered projects through CDM executive board, 1283 are large scale and the rest (987) are small scale. Asia and the Pacific countries possess the largest share of registered projects - around 1745 (76.77%); second highest are the Latin American and the Caribbean countries with 470 projects (20.68%). Africa holds the third position with 45 projects (1.98%) and the rest comprise 13 registered projects (0.57%).
In the Asia Pacific region, China and India are dominating in numbers of CDM registered projects and so far they have 887 and 515 registered projects respectively. In such a scenario, Bangladesh has only two projects (both developed by Waste Concern) -- one already operational in Dhaka and the other (from landfill gas to electricity generation) facing circumstances beyond the control of Waste Concern to implement.
Global carbon market and what is the present market price of CERs and VERs
There are two major options possible for harnessing the carbon market. One is CER under the CDM and another Verified Emission Reduction (VER) under the voluntary market. CER is compliance markets and VER voluntary markets. Both are expressed in tones of carbon dioxide (CO2) equivalents. The current market price of emission reduction credits in existing carbon markets is between US $19 and US $22 per ton of carbon dioxide for CERs, while the price for VERs is between US $8 and US $10 for VERs.
Market share of CDM projects
In 2005, the total global market of carbon trading was US$ 10.864 billion, out of which the CDM market share was only US$ 2.638. The volume of CER in 2005 was 710 million tons of CO2 equivalents with a price of US$ 7.5 per ton CO2 equivalent. In the year 2009, the total carbon trading market was US$ 116 billion, out of which the CDM market was US$ 25 billion with sales price of US $ 19 per ton.
How CDM can assist the private and public sectors in developing countries?
Developing countries in the process of achieving faster economic growth often have to settle for inferior technologies. These technologies more often than not consume more energy than state-of-the-art or advanced technologies. CDM allows a more energy efficient (or less GHG emitting) technology to be installed resulting in cost savings. It complies easily with the Department of Environment's regulations, ensure setting up a safer and cleaner plant and contribute to national sustainable development and to global environmental protection.
Companies of (Annex-1) developed countries participating in the CDM project will obtain the CERs to meet their domestic emission reduction targets in an economically efficient manner. However, companies from developing countries that have no requirement to reduce GHG emissions may also choose to gain ownership of CERs through the CDM at a low price to sell in the international market at a future date.
A Company (Annex 1 country) participating in the CDM project can finance a project in a developing country (Non-Annex-1 countries) by using any one of the following options:
l Full or Partial Equity: A company finances all or part of a CDM project in return for full or shared financial return and CERs.
l Financial Contribution: A company financially contributes towards the cost of a CDM project equal to some portion of the incremental cost of the project over and above the baseline technology, or finances the removal of market barriers, in return of the CERs.
l Loan: A company provides loan or lease financing at concessional rates in return for CERs.
lCER Purchase Agreement: A company agrees to buy CERs as they are produced by the project.
In most cases, however, CDM would help to finance the incremental cost of the project or might provide financing to remove market barriers to make the project financially viable.
The government of Bangladesh's response regarding CDM
In order to participate in the Kyoto Protocol's CDM process for generating CER, the Government of Bangladesh has set up a two tier Designated National Authority (DNA) through a government Notification on 13-10-2003. The lower tier, located at the Ministry of Environment and Forests (MoEF), is the secretariat or operational body of the DNA. It was to set up to perform all CDM related activities including giving preliminary approval of CDM projects through the CDM Committee. The upper tier, known as the CDM Board, gives the final endorsement of the approved projects. The Principal Secretary to the Prime Minister heads the CDM Board with the consideration that the designated person has jurisdiction over all secretaries of different ministries of the government, which may help achieve inter-ministerial coordination easily.
The main task of the DNA is to approve CDM projects, which can eventually be registered by the CDM Executive Board of the UNFCCC. As per the Modalities and Procedures of CDM, approval by the DNA is mandatory before project validation by any Designated Operational Entity (DoE) and subsequent registration by the Executive Board of the CDM.
Apart from establishment of DNA, the government has also established national procedures for evaluation and approval of CDM projects and developed sustainable development criteria for the evaluation of CDM projects.
Current status of CDM projects in Bangladesh
Being responsible for Climate Change related activities, the Department of Environment (under the MoEF) is fully aware of the CDM but its concept and scope were, however, not well understood by business communities and policy planners. Due to the reason, some of highly potential projects have been skidded away from the hands of the country like converting thousands autorickshaws to compressed natural gas vehicles. Many projects have also been underway individually which the experts say play role in damaging baseline of GHG emission status of the country.
It can be seen that the DNA of Bangladesh approved eight projects, out of which only two projects have successfully registered with the UNFCCC to claim carbon credits. Among the others, only one is able to go for expensive validation process. When scores of CDM projects are formulated in a year in the countries like China and India, Bangladesh could do only eight during the last five/six years.
Potential sectors for CDM in Bangladesh
Though the first two registered CDM projects were planned to reduce methane gas in waste sectors which is more than 20 per cent valuable than CO2 gas. Within 700 tons of kitchen market waste and municipality dumpsite, the two projects were supposed to reduce 487, 506 tons and 990,000 tons of GHG over an eight year period. Even the country's potential has been assumed ample in eight sectors. It should be emphasised that these are near term opportunities. With an increase in the carbon price and/or breakthrough in new technologies like
Solar cells, fuel cells, biomass gasification, etc., newer options will emerge.
a) Methane recovery from landfill with or without power generation
Of these seven categories, recovery of Landfill Gas has the most potential. From an environmental perspective, the outskirts of all major cities are becoming severely hazardous areas due to open and haphazard dumping of urban solid wastes. The recovery of landfill gas has been shown to be financially very profitable because the CDM financing amounts to more than 150% of the investment. If a portion of the benefits of the CDM project can be channeled to convert these dumps into sanitary landfills, the country will benefit tremendously because the municipal corporations simply do not have the money to upgrade the existing landfills. Moreover, electricity can be generated from methane recovered from the landfills.
b) Composting of urban
solid waste
Composting of urban solid waste has also been shown to be a viable CDM project. Positive aspects include the output from the composting plants representing a saleable product, and the prevention of landfill gas emissions that would otherwise have occurred.
c) Biogas from a wide variety of wastes
Biogas production from the five categories of waste mentioned above can not only give the
business enterprise a fuel to replace their present fossil fuel use, but also tackle their aggravating environmental concerns.
d) Solar home systems in off grid areas
Of all the renewable energy options for Bangladesh, solar photovoltaic has been identified by various independent sources as a potential area for CDM projects. The prospects for wind, minimicro hydro plant based biomass technologies have been shown to have limited prospects. With regards to wind and hydro projects, it is important to add that the potential has not been mapped to any extent to be able to outright dismiss these. It must always be remembered that in all countries of the world there will always be some prospects for these technologies. The prospect for plant-based biomass (husk, straw) is also limited because these products all have preset uses. Moreover, removing these free or cheap sources of fuel from the rural poor may have other consequences like loss of soil quality and deforestation. Solar Home Systems (SHS) can have a tremendous potential because even in the best scenario, in the next twenty years 20% of the area of Bangladesh will remain outside the grid. Due to increasing prosperity and widespread availability of electronic entertainment (television, radio, music systems) and communication conveniences (mobile telephone), there is increasing demand for electricity in all places of Bangladesh. It must be appreciated that 20% of the households represent nearly 5 million homes; 20% of that is a million homes. The present SHS dissemination programme has achieved only 50,000 or so units.
e) Efficient lamps to replace incandescent light bulbs
The prospect of efficient lighting comes about from the fact that nearly 25% of the total demand for electricity in the country is lighting. This is easy to appreciate because the combined demand for the households and commercial sectors is more than the industrial sector, and even in the industrial sector, there is a considerable amount of lighting load. The huge lighting demand creates a huge peak demand during the evening hours. This is causing the utility great difficulties because they have to operate expensive peaking plans. In reality, the utility cannot deliver the peak load and as much as 20% of the highest peaks during the year are managed by load shedding. The rural load is predominantly lighting using incandescent light bulbs. Through a suitably designed dissemination programme, the use of CFLs can reduce emissions significantly and in the process reduce the peak demand. An innovatively designed CDM project can certainly have an impact in this area.
f) Efficient brick manufacturing
The production process of bricks in Bangladesh uses crude inefficient technologies and coal as their fuel. Over 90% of the bricks are manufactured in this manner. The emission from
a brickfield constitutes more than 10% of the total GHG emission from the energy sector. Use of efficient technology, retrofitting the existing technology and fuel switching from coal to natural gas can have a big impact on GHG emission.
g) Sugar cogeneration
Sugar cogeneration is a well-known GHG emission option. The 20 sugar mills in the country
can be potential candidates for this technology. The only drawback is that all these mills are
public sector entities and are losing concerns. If those challenges can be tackled, then CDM projects can be initiated in this sub-sector.
Support required for Bangladesh to speed up the process of CDM project formation
Despite all these opportinuties, the country is yet to develop capacity of DNA and research on baseline data collection, both are important to formulate accurate projects without delay. Since CDM involves complicated project development, it is limited within a few organizations. For efficient CDM operations, capacity development of the both government and non-government members of the CDM Committee is necessary. Lending institutions and selected civil society groups are to develop along with public and private sector enterprises where CDM projects can be developed. Besides, NGOs are to be involved to execute CDM projects in the rural areas, especially those having adaptation co-benefits
Beside, the country has data thirst to show baseline of pollution in most of the sectors. Some of the recent studies regarding CDM have generated some data, but that is extremely specific and applies to only the project being developed. Usable data for developing CDM projects in Bangladesh is very limited. As such, effort towards baseline data collection should be given priority in order to develop CDM projects in Bangladesh.
Current Issues In Carbon Market Development in Bangladesh
l With the exception of waste projects, maximum 30% of the investment can be covered by CERs. There is a need for local financing in order to match the remaining 70% of the investment. With the current interest rate of commercial banks, many projects seem difficult to realise or IRR becomes unattractive. there is a problem of clear-cut baseline identification for many management projects. Low level of awareness amongst the financial and private sectors regarding CDM opportunities needs to be removed. Many energy and waste sector CDM projects require a bundling approach to get CER benefit in big quantity. Identification of the appropriate institution for bundling of the projects is in some instances a large barrier towards implementation of the projects. In order to encourage CDM investment, one-stop approval process for CDM projects involving CDM/Board of Investment, Bangladesh Bank and line ministries should be put in place.
.................................................................
The writers are the co-founders of Waste Concern and can be reached office@wasteconcern.org. Official website of Waste Concern: www.wasteconcern.org