Services for Clean Development Mechanism (CDM)

Background on Clean Development Mechanism

The recent phenomena on Earth like climate change, melting polar iceberg and higher sea level are the results from the human’s consumption of energy produced by fossil fuel such as oil and coal in the recent centuries. During the said energy production, carbon dioxide (CO2) is continuously emitted to the atmosphere, compounding with other gases and becoming the greenhouse gases covering the Earth like a giant blanket. These gases cause the global warming which is the reason behind the aforementioned phenomena.

 

With the attempt to prevent further damage from global warming, the Conference of Parties to the United Nations Framework Convention on Climate Change (UNFCCC) eventually adopted the Kyoto Protocol in 1997. The Protocol binds the countries in Annex I (there are 34 counties, most of them are developed countries) with the commitment to reduce the emission of greenhouse gases by around 5% from the 1990 level. Thailand is not listed in Annex I, so it does not have to follow the said commitment. However, greenhouse-gas emission in the developed countries costs highly. Kyoto Protocol, then, initiated the Clean Development Mechanism (CDM) to allow the countries in Annex I to cooperate with other developing countries to reduce the greenhouse gases emission as it costs much less in the latter. This cooperation is operated with the method called “Carbon Credit.”

 

Note: greenhouse gases comprise six gases, namely, carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFC), perfluorocarbons (PFC) and sulphur hexafluoride (SF6)

 

Projects Qualified as CDM Project

The projects that can be qualified as CDM project are the projects which practically decrease greenhouse-gases emission and the result must be measurable. Also, these projects must support the sustainable development in Thailand. The examples of some projects with qualified characteristics are as follows:

• The improvement of effective energy usage
• The renewable energy project, e.g., biomass fuel power plants and biogas waste water treatment system
• The fuel switching project
• The improvement of production process
• The waste management project

CDM Project Cycle

 

The CDM project is divided into two phases as follows:

1. Project development phase
   

   1.1 Project feasibility study

   1.2 Project Idea Note or PIN

   1.3 Project Design Document or PDD

   1.4 Project proposal for approval from designated national authority (DNA). Thailand’s DNA is the Office of Environmental Policy and Planning

   1.5 Project validation and evaluation by independent validators

   1.6 Registration with the Executive Board (EB) of UNFCCC

   The processes in this phase are conducted once only.

2. Project operation phase
   This phase starts after a particular project has been operated, for example, after the biomass power plant starts producing electricity. This phase comprises the following procedures:
   

   2.1 Project performance monitoring

   2.2 Project verification and certification

   2.3 Issue of Certified Emission Reductions (CERs) by the Executive Board

   The processes in this phase are annually conducted.

Benefits from CDM

The projects joining CDM project will earn the income from the sale of their annual emitted-carbon. The carbon trade is made in the form of CERs with the trade unit expressed in carbon dioxide equivalent (CO2e). There are two kinds of CERs trade terms which are (1) seven-year term, renewable twice and (2) ten-year term.

 

Problems and obstacles to the CDM project

1. Some processes such as PIN and PDD cost highly (around Bt. 2.6 million – 3.2 million) and take long period (about 3 – 6 months). If the project has been already started but, later, is rejected, it will be nothing but loss.
2. The project developers must understand the method or guideline for project submission to be in line with CDM’s requirements or conditions set by the EB.
3. Delayed submission might cause a project with CDM’s requirements to become unqualified and eventually lose the opportunity of CERs sales.

Scope of services provided by TMB’s Business Development Department

During project development:

1. Study on possibility of joining CDM project.
   
2. Collaborate with the department’s co-agents who want to buy CERs from the project.
   
3. Present details and conditions of buyers to entrepreneurs for choosing their trading partners.
   
4. Prepare PIN and present it to purchase agents.
   
5. Present the project and coordinate with purchase agents.
   
6. Give advices on CERs trade agreement between the entrepreneurs and purchase agents.
   
7. Prepare PDD and present it to purchase agents.
   
8. Coordinate and give advices on convening a presentation forum with communities (if any) close to the project location.
   
9. Coordinate and provide information required by the project validators during the validation period.

During project operation:

1. Coordinate with the validators in terms of monitoring and examining the project performance during CERs sales period.
2. Select additional purchase agents who want to buy CERs (in case that there are extra CERs from the first trade agreement).