The National Clean Development Mechanism Authority (NCDMA), which is responsible for “evaluation and approval” of Indian projects that reduce greenhouse gas emissions to earn credits in the global carbon market, simply believes the promoter's assurance that the project meets certain key criteria, according to an American consulate cable released by Wikileaks.
This kind of “cursory” approval leads to a high rate of rejections of Indian projects at the international level, it says.
The Clean Development Mechanism (CDM) allows projects that reduce greenhouse gas emissions (GHGs) — and thus help fight climate change — in developing countries to earn credits. These credits can be traded in the international marketplace — at a current price of about 8.5 euros each on the European Climate Exchange – and are bought by rich countries to help meet their emission reduction targets and obligations under the Kyoto Protocol.
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To ensure that these credits truly help tackle climate change, they are required to be “additional,” so that emission reduction that would have happened anyway does not receive any credits.
“The project should lead to real, measurable and long-term GHG mitigation,” says the guidelines for determining additionality on the NCDMA website. “The additional GHG reductions are to be calculated with reference to a baseline.”
However, according to a Wikileaks cable originally dispatched by the Mumbai U.S. consulate in July 2008, the NCDMA does not actually evaluate projects for additionality.
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“At a seminar on CDM in Mumbai, R.K. Sethi, Member Secretary of the NCDMA and present chairman of the CDM Executive Board, publicly admitted that the NCDMA takes the ‘project developer at his word' for clearing the ‘additionality' barriers,” says the cable.
While Mr. Sethi is no longer with the NCDMA, the current Member Secretary could not be reached for his comments.
According to an accredited verification agent for the CDM projects, who is also cited in the cable, this “cursory” approval is why so many Indian projects are rejected at the international level.
“CDM projects in India do not have to be validated or verified to get host country approval, while both processes are mandatory to get the project registered with the UNFCCC [United Nations Framework Convention on Climate Change],” she told the consulate officials, the cable says. “For this reason,” she pointed out, “Indian projects account for 44 per cent of the total projects rejected by the CDM Executive Board.”
Additionality barrier
It should be noted that “additionality” is a controversial criterion. Many Indian companies, including those cited in the cable, point out that the high cost of energy is pushing industry towards greener technologies even without CDM credits. That goes against the “additionality” barrier, since it would count as a business-as-usual scenario.
However, they argued that such projects should be allowed to qualify for carbon credits anyway.
“Any process that uses cleaner technology or energy more efficiently should be ‘rewarded', especially given the high cost and finite availability of gas and fossil fuels,” companies told the consulate officials.
Some policy experts argue that imposing a business as usual baseline — from which additionality is then calculated — effectively imposes an emission cap on developing countries.
Under the current international system, emissions are only capped for rich nations.