In April I reported that economic and political pressures were beginning to impact the UN carbon-credit programme that supports clean technology projects in the developing world, otherwise known as the Clean Development Mechanism (CDM). The full story is also in the latest issue of Nature Reports Climate Change.
Now, for the first time in two months, fresh data are being reported on the number of new projects entering the programme’s approval process. While the dip in project submissions that I wrote about has turned out not to be as bad as it looked at the end of February, the figures from the UNEP Risoe research centre confirm that the CDM is likely to do less in the long run to cut greenhouse gases that was expected pre- credit crunch.
Here are the new monthly data on projects requesting ‘registration’ – i.e. approval (courtesy of UNEP Risoe CDM/JI Pipeline Analysis and Database, May 1st 2009). Bars represents monthly submissions, and white and purple segments show the number of projects that have since been approved or been issued credits. Click on the graph to enlarge:
Though there has been some recovery since February’s trough, the numbers continue to drag below last year’s average of 130. In March, analysts at the Risoe Centre had already shaved 2 per cent (or 33 million tonnes of CO2) off their previous month’s projection of total greenhouse gas emissions likely to be offset by the CDM during the period 2008–2012. Now they’ve cut that estimate again by a further 55 million credits, or tonnes of CO2.
Along with plunging prices for carbon credits, scarce financing in the sickly economy is one reason why fewer new ventures are getting proposed. And since projects are often on the drawing board for months before submission, the effects of the 2008 financial crisis may only recently have started to reach the CDM’s inbox.
But carbon market experts are speculating that the drop could also relate to uncertainty about future climate policy, for which there could soon be a remedy. Arne Eik, an analyst at the market research firm Point Carbon, had the following to say:
“We’re getting closer and closer to 2012,” he says, referring to the date when a new global climate treaty, being negotiated in Copenhagen this December, will take effect. The deal is intended to replace the Kyoto Protocol, but until it’s struck, the future role of the CDM — and revenues from its projects — can’t be guaranteed. “If we get some good signals for the CDM in Copenhagen, I would expect it to increase again in spite of the difficult economic times,” says Eik.