Written by Andrés Melandro, Sustainability Consultant.
Indigenous communities are key stakeholders in global climate change mitigation and their territories’ local sustainability. At the regional level, according to the State of the Amazon report published by WWF in 2017, territories governed indigenous communities correspond to 33% of the Amazon and only 8% of deforested lands. This fact highlights the relevance of their role in the fight against deforestation. Over the past decade, technology has empowered indigenous people to monitor their territories. For example, GPS devices are used by indigenous groups to report environmental crimes. This has made companies operating in the Amazon more accountable.
In Colombia, indigenous reservations have historically been located at the crossroads of drug trafficking routes and rebel groups fiefdoms. Having been hit by the armed conflict between guerrillas and the Colombian army, their development rates are now below the national average.
The Inga and Kamsá communities, native of Alto Putumayo and Caquetá provinces respectively (both in southern Colombia) play a key role in this new stage of their regions, in which the progressive restoration of public order can generate an intensification of deforestation. Putumayo and Caquetá are located in a transition zone between the Amazon and the Andean region, Colombia’s economic and administrative center, and they display some of the highest deforestation rates in the country. In addition, the signature of the peace agreement in 2016 has meant the arrival of settlers and large economic groups, which is reflected in land-use changes towards agriculture, whether of large estates or subsistence. The agricultural frontier and livestock frontiers exert pressure on forests. It is worth remembering that the forestry sector is the largest emitter of greenhouse gases (GHG) in Colombia, responsible for 36% of emissions, according to the National GHG Inventory. Hence this sector is key to achieve the goals of the nationally determined contribution (NDC) of the country.
ALLCOT coordinates forestry projects with the objective of preserving forests so these will continue playing their role as carbon sinks. Since the founding of ALLCOT 10 years ago, the social consultation process has been rigorous and indigenous communities have been allies of several forestry projects. The social consultation carried out by ALLCOT is always governed by the principle of prior, free and informed consent. Through the funds derived from forestry projects that ALLCOT develops, it is possible to improve the community’s wellbeing, measured by indicators linked to the UN’s Sustainable Development Goals (SDG) such as 24-hour access to energy, schooling rate or infant mortality rate. The ultimate goal is to improve the social and economic development of the local populations of the area in parallel with forest protection. This way, we contribute to both the 2030 Agenda and the Paris Agreement. This is ALLCOT’s mission and the ancestral knowledge that indigenous people have about forests is a key tool to achieve it.
Written by Alexis Leroy, CEO ALLCOT
Carbon offsets are just as valid and valuable as renewable power
Anyone involved in developing clean energy projects around the world will be familiar with the demands of securing project finance. Lenders typically want to see a solid revenue stream before they consider financing renewable energy or low-carbon energy projects.
Normally, a Power Purchase Agreement (PPA) fits this requirement: a long-term offtake agreement with a high-quality buyer offers confidence that the project will generate steady cash flow to service its debt.
Occasionally a PPA by itself may not be regarded as a sufficient guarantee of performance, or the off taker’s credit quality may not be sufficiently strong. In such instances additional security can be added in the form of liquid guarantees or performance bonds.
But there is another revenue stream that can play its part: carbon offsets.
Carbon offsets represent the saving in emissions of carbon dioxide and other greenhouse gases (GHGs); they’re measured against a baseline in which the project would use legacy technologies. In this way a wind farm, a solar park or a waste-to-energy plant represents savings in GHG emissions compared to coal or even gas-fired power.
The world is waiting for a new global offsets market to replace the Clean Development Mechanism (CDM) that will end when the Kyoto Protocol is superseded by the Paris Agreement in 2021. But in the meantime, there are plenty of opportunities to develop and sell carbon offsets for some existing markets. The revenues generated should help secure project finance.
South Africa and Colombia are leading the way in creating high-confidence markets for carbon offsets, by allowing them to be used in part payment of their respective national carbon taxes and thereby granting them a monetized value – at least on paper.
Besides, the International Civil Aviation Organisation is preparing the launch a global offsetting market for airlines in January 2021. Demand for offsets from airlines participating in CORSIA is projected to reach as much as 174 million tonnes of CO2 equivalent (tCO2e) tonnes in 2025 and could be nearly 8 billion tCO2e by 2040.
And beyond these formally established, government-backed markets is a wide variety of voluntary carbon offsetting programs operated by large industrial, commercial and retail companies around the world. According to Forest Trends, nearly 49 million offsets were retired by governments, companies, and individuals in 2018.
There are plenty of challenges facing the use of carbon offsets as securities for project finance. Firstly, the revenue stream from offsets would likely form only a fraction of the overall project costs, and for some, it may simply not be worth the effort to incorporate offsets into a finance agreement.
Also, revenue streams from offset sales tend not to be regular, but “lumpy”. Offset projects must submit independent verification and reporting of the volume of emissions reduced before they can apply for the issuance of those credits, and the costs associated with that process usually mean they can only afford annual or even biennial issuance. Such periodic issuance may not be steady or regular enough to satisfy a lender.
Yet at the same time, using carbon revenue to secure financing may yield two significant benefits: the quality and the reliability of the purchaser. In the case of countries with carbon taxes that can be part-paid in offsets, the guarantor of demand is the government, and industrial emitters must abide by the law.
Similarly, in the case of CORSIA, the end-buyers will be international airlines seeking to comply with government-established, UN-approved targets.
Why is the end-use of the offset important? Because lenders are concerned not only with the scale of revenue streams from a project but also the reliability and creditworthiness of the buyers. Higher-quality off-takers will mean more security for the seller and hence for the lender.
Secondly, it’s important to understand that there is a direct link between the security of the supply of renewable electricity and the security of the supply of carbon offsets. It should be the case that any lender that relies on a PPA as security against project finance, should also be able to rely on the flow of offsets through an emissions reduction purchase agreement (ERPA).
Lenders will consider the reliability of the power project – how much power it is expected to deliver across the length of any contract – when estimating the value of the PPA. The PPA, therefore, is a measure of the potential supply of power, and it can, therefore, be a measure of the supply of carbon offsets.
In the case of many reliable renewable energy technologies – waste gas, solar and even wind power – the actual generation of power and the generation of offsets are very closely linked.
A project developer could even use future delivery of offsets as a source of seed capital for a project. This was a common practice under the UN Clean Development Mechanism. By arranging an ERPA with a buyer who is seeking offsets for some compliance or even voluntary purpose, a project developer can then use this ERPA to raise seed capital. To be sure, the volume of offsets may be subject to clipping, but the principle is sound.
So why don’t lenders take ERPAs into account? If we agree that the fight against climate change is paramount, then how can we not support carbon offsets as a valid source of capital, and indeed may be more valuable than megawatt-hours of renewable power generation?
Written by Mercedes García, Climate Change and Sustainability Manager
The degradation of mangroves during the last years is alarmingly increasing. Uncontrolled deforestation is one of the main causes, but the increase of the temperature of the planet is altering the salinity of certain areas, which significantly impact on the stability of an ecosystem as fragile as mangroves are.
Mangroves live in tropical and subtropical latitudes. To the south of Gambia, mangroves occupy Casamance estuary, where they form a long band over the northern margin of the 6 km wide river, between Ziguinchor and Tobor, in Senegal. Due to the anthropogenic pressure, linked to illegal harvest and agriculture, there are many mangroves areas in a state of maximum degradation on which we must act.
ALLCOT, together with the Senegalese NGO OCEANIUM, is working on the developing of reforestation and conservation project for a part of this mangrove, starting in Senegal and expanding in the coming months to the Gambia and Guinea Bissau. The goal of the project, called SWAMP (Senegal and West Africa Mangrove Project) is to empower the local communities through reforestation and mangrove conservation. For this, the project will be registered in the international standard SDVista with the objective of obtain carbon credits that could be reinvested in these communities and different socio-economics activities. For that, the participation of Senegalese government and local authorities has been necessary, through various meetings held during last year.
On October 15, ALLCOT had the privilege of being one of the speakers in these meetings, held in Zinguinchor. During a complete working day, the ALLCOT team had the opportunity to share with the participants how the project is structured, the short and long term objectives, and especially the detail of the socio-economics activities to be implemented, all of them aligned with the Sustainable Developing Goals (SDGs) of the 2030 Agenda.
There was also the opportunity to discuss and share a lunch with all the mayors who have already joined the initiative and many others who are still evaluating the possibility of adhering. Ideas about initiatives of developing and their alignments with the needs of the populations were exchanged. It was a very fruitful workday, which will be a turning point in the design of the SWAMP project.
ALLCOT has extensive wide experience in the design and structuring of the project in the field of mitigation of greenhouse gas emissions. Our role in the project is to improve the quality of life of the populations that live in the mangroves through the incomes from the carbon credits. To obtain the maximum benefit the project is designed to cover two main areas. In the most degraded areas, propagule plantations of Rhizophora Mangle and Avicennia sp are scheduled. In the areas, best-conserved, protection and training activities will be carried. These activities include the creation of monitoring brigades, to awareness and training in the field. In parallel, the technical team is working in different activities linked to the food security and gender equity for the communities who live in the mangrove areas.
Due to the significant social component of the project, the standard chosen has been SDVista. Standard developed by VERRA for all those projects which mitigate the greenhouse gas emission but have a profound impact on local populations.
One of the objectives of the standard is not only to evaluate the contribution of the projects with the SDGs, but also their quantification, monitoring, and of course the verification by an accredited entity. It is, therefore, a robust standard that aims to demonstrate in an effective and verifiable way that the projects are contributing to meet the needs of certain populations.
During last years, in ALLCOT we have worked in each one of our projects in the alignment of all the activities with the SDSs, all channeled through the fight against climate change.
SWAMP project is undoubtedly a clear example of the strategy of the company for the future. Empower the local communities through the fight against the current climate crisis by developing initiatives in the scope of all the SDGs of the 2030 Agenda.
Written by Patricia Piñero, Sustainability Consultant.
EXPOTURAL has become the national reference for sustainable tourism, where nature and biodiversity protection has the greatest role. It is a space to propose and facilitate the promotion and development of destinations through sustainable rural tourism.
A 6000 m2 venue hosted this celebration, accommodating numerous activities available to attendees. Among them the award for the best initiatives in sustainable tourism, being the winning company Bahía de Santander, and secondly, Casa del Tesoro. Bahía Santander received the award thanks to its ecotourism and environmental education project focused on the recovery of the osprey, through the installation of innkeepers and nests in height. A meeting point was also set up for professionals of Active Tourism business tables so that both exhibitors and attendees could participate in these business rounds.
In addition to all these activities, the II International Forum of Nature Tourism and Sustainable Tourism was held, a series of presentations and round tables developed within the pavilion, and structured in different blocks, which dealt with topics such as Ecotourism, Local Development and Sustainability, rural and active tourism, etc. All under a Responsible Tourism approach, above all, for the climate change mitigation.
Coinciding with the general strike called worldwide to support the fight against climate change, EXPOTURAL actively participated in this cause by dedicating the first day of the II International Forum of Nature Tourism and Sustainable Tourism to Climate Change, the latter being one of the structural axes of the fair’s philosophy.
Another edition in which we had the pleasure of being invited to participate in the forum and of being able to be an active part of EXPOTURAL, not only in the presentation we offered to attendees on the management of the carbon footprint for companies, but also contributing to offsetting the fair’s carbon footprint itself.
Alfonso Polvorinos, technical director of the Fair and the Forum, contacted us some time ago to explore how we could assess the impact of the fair on climate change and mitigate it in the best possible way.
For the 2018 edition, we calculated the fair’s emission identified them and drew up a reduction strategy as recommendations adapted for it. After this study and conclusions, we offered the possibility of compensating for the emissions resulting from the activity of the fair, to obtain a neutral carbon balance. This was done and we have continued working to make it possible again in this edition.
This emission offsetting consists, in broad terms, of the economic investment in carbon credits, an international decontamination mechanism introduced by the Kyoto Protocol for the reduction of the emissions causing climate change.
Therefore, the fair compensated these emissions generated through its collaboration with the RMDLT project, a forestry project located in the Brazilian Amazon that works to protect this fragile ecosystem from the rampant deforestation of the jungle, while allowing degraded forests to have the opportunity to regenerate.
The project contributes to reaching 12 out of the 17 United Nations’ Sustainable Development Goals, among the most prominent we can mention: the improvement of the quality of life of the families that reside within the area and the land tenure of the people committed to the conservation.
For more information check our website www.allcot.com, or you can contact us directly at the following email email@example.com
— Expotural (@FeriaExpotural) September 27, 2019
Written by Encarnación Hernández, Climate Change Mitigation Consultant
We are currently facing a critical global situation in terms of consumption of plastics and their subsequent recycling. It is expected that by next year, plastic production will increase to 350 million tons. If this rhythm and the current “use and discard” consumption model are maintained, this level could increase to 619 million tons in 2030.
The process of decomposing plastic material produces the emission of two greenhouse gases with a high global warming potential (methane and ethylene) and a very harmful effect on human health. For this reason, in recent years various initiatives have been developed in the field of plastic waste reduction and recycling. Their main objective is to reduce dependence on existing conventional resources. However, there are other solutions in the market contributing to the manufacture of different products from recycled plastics. This is a great innovation in the recycling market.
ALLCOT Group, a company specialized in environmental solutions in the fight against climate change, is working on an innovative project based on the construction of sustainable housing from recycled plastic.
The main objective is the recycling of plastic waste to give it a second life, improving the performance of both recycling and waste recovery. The population is involved in the collection of plastic, mainly bottles, from which blocks and bricks are manufactured and used for the construction of houses or other types of buildings. These materials are flexible and flame retardant light and they display high insulation capacity. These characteristics make them ideal to face extreme weather events that often affect vulnerable countries to the effects of the current climate crisis, such as heatwaves or deterioration caused by water on such conventional buildings.
The ongoing project will be replicated in developing countries. It has focused on vulnerability groups, including women working in the informal waste recycling sector, and therefore contributing to the United Nations’ Sustainable Development Goals signed in the 2030 Agenda. In addition to reducing the amount of waste destined for its final disposition and increase its recovery, the project will yield another series of economic, social and environmental benefits. These include an increase in the country’s resilience to climate change, poverty alleviation, and improvement of the well-being and health of populations by offering a new sustainable livelihood. Finally, it also contributes to greater access to drinking water and improved biodiversity protection in the area.
This project contributes to the mitigation of GHG emissions and thus tackles the current climate crisis. With the use of different internationally accepted methodologies and previous studies, the actual reduction of greenhouse gas emissions can be calculated. In fact, the secondary production of construction materials entails lower amounts of CO2 emissions compared to conventional production (from 40% to 80% depending on the type of material).
Given that fuel and electricity consumption the freest are the stages of the building process that release most CO2, the plastic brick recycling project is expected to have a high impact on greenhouse gas emissions reduction.
Concentrating on five key areas (cement, plastics, steel, aluminum, and food), the project “Completing the Picture: How the Circular Economy Tackles Climate Change” illustrates how designing out waste, keeping materials in use, and regenerating farmland can reduce emissions by 9.3 billion tonnes. That is equivalent to eliminating current emissions from all forms of transport globally.
ALLCOT is currently developing a methodology to estimate CO2 emission reductions since there is none approved by the United Nations Framework Convention on Climate Change (UNFCCC) that directly applies to the project in question.
Once approved by the United Nations, project implementation can begin.
We need additional efforts to decarbonize our economy while creating creative and innovative sustainable growth opportunities.
✅ The actual situation of #plastic is critical, and if we don’t take forceful actions, it will be worse over the years. #Allcot works on a project that aims to give plastic a 2nd shelf life. Find out more 👇
https://t.co/XpACo7bLhK#recycling #co2 #climatechange pic.twitter.com/oKY108qgr5
— ALLCOT Group (@Allcot_news) October 17, 2019
Written by Alexis Leroy, CEO ALLCOT
Last month, the climate change community met in New York City for Climate Week. Numerous organizations hosted events around the city on the sidelines of official United Nations events, making Climate Week one of the largest climate gatherings of the year.
I attended, among other events, the International Emissions Trading Association (IETA) “Carbon Forum North America”, held at the iconic Explorers Club headquarters in midtown.
The Explorers Club is an historic establishment that dates back to the early 20th century, when explorers such as Edmund Hillary, Theodore “Teddy” Roosevelt and Charles Lindbergh would regale members with tales of extreme conditions, new species of animals – some are still displayed in the club – and their efforts to push back the boundaries of human knowledge and achievement.
I like to think it was no accident that IETA chose The Explorers Club to host their annual event. Climate change is unknown territory: we are charting a new path into the realm of changing weather patterns and mankind’s ability both to prevent and to adapt to a changing environment.
And it also occurred to me that what groups involved in climate change are doing is very much akin to exploration. Not only does our changing climate represent the new territory, but the efforts that nations are making to prevent catastrophic climate change are also an entirely new way to tackle environmental problems.
To apply market mechanisms to solve an environmental problem may seem contradictory, but it speaks to one of the most powerful forces that drives mankind: its ambition, its pursuit of security and knowledge and its desire to survive. All of these are represented in market systems, and they were also forces that drove the great explorers.
Recently, a study was published that showed how close cooperation among nations in linking their carbon pricing systems could bring down the cost of reducing emissions by as much as $250 billion a year by 2030. Efficiencies of scale, as well as closely aligned regulations, are critical to achieving these cost reductions.
This is ground-breaking research that highlights how the power of markets can be used to achieve a global good. And the idea of markets for environmental outcomes is not even new: The United States pioneered the use of markets for environmental goals when it developed the first emissions trading systems for Sulphur dioxide and nitrogen oxide emissions from coal-fired power plants in the 1970s.
This study explores the farther reaches of what may be possible if nations can agree on a clear and transparent set of standards and regulations for countries to use when setting up their carbon markets. The UN negotiations in Santiago this December will be critical to bringing to reality the exploratory work of work such as this study.
This research demonstrates how important it is that nations, as well as interest groups in the environmental space, consider the role of business. There are plenty of NGOs advocating for practical solutions to the problem of climate change, but not many of them address the concerns of the business community.
It’s not heresy to say this: whatever we may think of the global economy and its presence in our lives, business is among the most important constituencies that make up society. And as such, it has a role to play in addressing our problems.
Within the climate sphere alone, green NGOs advocate for solutions that consider science, human rights, climate justice, gender, youth, and workers. Why would it be seen as wrong that an NGO should help craft effective, efficient market mechanism regulations so that business can fully play its role?
Some may say that governments simply need to regulate carbon emissions out of existence, by imposing a tax on carbon dioxide. There are many parts of the world where that happens. Real explorers, however, are looking for ways that guarantee the environmental outcome, rather than government tax receipts.
Capitalism is often seen as incompatible with climate action; just look at the protests that are growing by the day around the world. The role of pioneers and explorers like IETA is to make the two work together, speeding up climate action by ensuring that there’s a real incentive to take action.
Carbon offsets have been around for more than 20 years. In that time a dizzying variety of projects have been developed to reduce harmful carbon dioxide emissions compared with business-as-usual, generating billions of tonnes of effective and real reductions.
In that time, we have learned how to measure, verify and report on these reductions, we have built a system of electronic registries to hold them and we have built markets to trade them. Carbon offsets are now a mature business.
But in those 20 years, for the most part, we have only focused on the carbon element: every offset project generates these. But for a long time, we overlooked the co-benefits:
- Reductions in land pollution.
- Reductions in air pollutants other than CO2.
- Stronger and healthier local communities.
- Economic opportunity and jobs.
The launch of the Sustainable Development Goals (SDGs) by the United Nations in 2015 represented the starting point for a broader conversation on environmental issues. For many years, the concept of sustainable development had been discussed within the UN and other international fora, but the issue had not been translated into a set of wide, actionable principles.
The refinement of the SDGs into a concise list of 17 goals that would allow the world to “meet the needs of the present without compromising the ability of future generations to meet their own needs” represented the first time that interlinked social, environmental and economic goals have all been brought together
Until 2015 it had been climate change that received the most attention, thanks to the Kyoto Protocol and more recently the Paris Agreement. However, a large number of public and private actors had long seen the need to address other global goods in addition to the climate, and over the last ten years there were increasing efforts to capture these additional outcomes.
Early attempts focused on capturing the “co-benefits” of carbon emission reductions. Distributing cleaner cookstoves, for example, reduced health impacts from burning wood in poorly-ventilated accommodation and allowed children to attend school and women to work, rather than risk their safety collecting firewood, all while reducing carbon emissions from inefficient fireplaces
Forest-based projects were also seen to bring economic and community benefits while also storing vast amounts of carbon dioxide. Small-scale, distributed renewable power generation brought benefits across many of the 17 SDGs to remote communities.
The challenge, however, has always been how to quantify these non-carbon benefits and render them into an asset that represents the value of sustainable development, and thereby incentivise the scale of investment that is needed to achieve the SDGs.
Earlier this year, two of the leading carbon offset standards, Verra and the Gold Standard, launched new rules and criteria for projects that specifically target the Sustainable Development Goals.
Verra’s SD VISta applies to any project that is contributing to the SDGs, including those related to eliminating hunger, promoting good human and environmental health and well-being, and ensuring education, and can be used in conjunction with its existing Verified Carbon Standard
Similarly, the Gold Standard for the Global Goals offers the opportunity to combine carbon offsets that meet the requirements of the UN Clean Development Mechanism or the Verified Carbon Standard, with measurable outcomes in terms of lifespan (Averted Mortality and Disability in Adjusted Life Years) or water security (water benefit certificates).
With these standards, the way is now open for climate-based projects to capture and quantify the associated public benefits embodied in the SDGs. We believe these standards will become the norm over time, as public and private stakeholders look to maximise the impact of their investments.
At the same time, it’s becoming clear that some existing technologies have passed through the realm of being “innovation” and are now “business as usual”. Wind power is a clear example, and we believe the time is right to start to streamline the process of calculating climate benefits from these newly-incumbent technologies.
Monitoring, verifying and reporting emissions reductions, as well as holding them in a recognised registry are critical components of the carbon offset business. But these aspects of offsetting, while well understood now, are challenging in developing economies and the need for increased standardisation of methodologies and baselines offer an ideal opportunity to leverage the capability of the blockchain to validate both the source and the transactions of offsets. By unlocking a trusted global market for environmental attributes, the blockchain helps renewable energy generators and carbon off-setters yield the full economic value and social benefit of their attributes, and provides corporates with a mechanism to flex their financial muscles and contribute in a meaningful way to the energy transition and to the SDGs.
Article 6 of the Paris Agreement comprises three approaches for cooperation between Parties – “cooperative approaches” under Article 6.2; a new mechanism to promote mitigation and sustainable development (Article 6.4 – 6.7); and a framework for nonmarket approaches (Article 6.8 and 6.9). There is very little clarity on how these approaches will function and very basic issues such as scope, governance and infrastructure for operationalising provisions under Article 6 are still to be agreed. Our view is that to ensure that SDGs are not relegated to being merely a reporting framework and the SDGs actually change countries’ development trajectories, its inclusion under Article 6.8 can unlock its potential and to effect real change.
As the Gold Standard puts it: “To ensure that sufficient resources are available to encourage the drive to achieve SDG goals, we can streamline the process of MRV for certain project types that deliver widely understood and easily quantifiable benefits.”
Board member at Climate Markets and Investment Association (CMIA)
ICAO decides that most probably emissions units generated from mechanism established under the UNFCCC and the Paris Agreement will be eligible for use in CORSIA
The Council of the International Civil Aviation Organization (ICAO), the UN body responsible for global aviation, approved the Emissions Unit Eligibility Criteria (EUC) for Carbon Offsetting and Reduction Scheme for International Aviation, CORSIA. This means what offsets can be used under the new aviation pollutions scheme. And emissions units generated from mechanism established under the UNFCCC and the Paris Agreement most probably will be eligible for use in CORSIA (pending of final approval) among others.
About Carbon Offset Credit Integrity Assessment Criteria, there are a number of generally agreed principles that have been broadly applied across both regulatory and voluntary offset credit programs to address environmental and social integrity. These principles hold that offset credit programs should deliver credits that represent emissions reductions, avoidance, or sequestration that:
– Are additional.
-Are based on a realistic and credible baseline.
-Are quantified, monitored, reported, and verified.
– Have a clear and transparent chain of custody.
-Represent permanent emissions reductions.
-Assess and mitigate against potential increase in emissions elsewhere.
-Are only counted once towards a mitigation obligation.
-Do no net harm.
Also there are criteria for emissions unit programme design elements:
-Clear methodologies and protocols and their development process
-Offset credit issuance and retirement procedures
-Identification and tracking
-Legal nature and transfer of units
-Transparency and public participation provisions
-Sustainable development criteria
-Avoidance of double counting, issuance and claiming
More information here: https://icao.int/environmental-protection/Documents/Resolution_A39_3.pdf
The UNFCCC’s Clean Development Mechanism (CDM) has enjoyed great success in deploying more than $300 billion of investment into clean technology in developing countries around the world.
But recent decisions by the UNFCCC risk alienating many of the companies whose activities support this mechanism and discriminate against smaller enterprises.
Returns on CDM investments have fallen far short of expectations after prices for CERs collapsed and demand plunged. Project developers face shrinking returns but their costs remain high.
Unfortunately, the UNFCCC’s reaction to the drop in demand and prices for CERs has been to penalise project developers by requiring them to pay their Share of Proceeds before submitting their Request for Issuance rather than after the CERs have been generated and possibly, monetised.
This means that smaller developers have to divert precious cash flow to the UN before they have realised the assets. Bigger companies with greater financial resources naturally don’t find this a problem.
What’s more, the UNFCCC has introduced financial penalties for developers who withdraw requests for issuance or whose request is rejected. Developers stand to lose up to $30,000 for each issuance that is withdrawn after it has been published or that is rejected.
The CDM secretariat is already notorious for rejecting requests or issuance for the flimsiest reasons, ignoring the merits of the project and the accuracy of its verification.
Such financial penalties will act as a powerful deterrent to developers from requesting issuance, and could even kill off remaining interest in the CDM. Project developers take on enormous risk when setting up CDM projects in terms of time, money and resources, and to face a new, additional risk from the mechanism’s administrator is unacceptable.
Again, larger companies can devote greater resources to ensuring requests for issuance are compliant, so this decision also discriminates against small and medium sized enterprises which have fewer resources to devote to administration.
Project developers and investors must unite in their opposition to these new financial demands, which act as a deterrent to new investment and development and as a punitive tax on their activities, which benefit both the UNFCCC as well as the entire planet.
We hope that developers can agree a common approach and appoint a representative body to bring these concerns to the attention of the CDM authorities.
Alexis L. Leroy
CEO, ALLCOT Group