Global Warming, CDM Project and Nepal.

The impact of global warming is becoming increasingly evident in the world's fragile
Polar Regions and our own Himalaya. High mountain communities in Nepal have noted
that glaciers are retreating at unprecedented rates. The planet's extremities are the canary
in the coal mine - alerting the rest of the world to the extent of the changes that are
coming.

Nepal has ratified Kyoto Protocol, which considers justifiable use of resources to limit or
reduce the emission of gases that contribute to green house gas inventory in the
atmosphere. Nepal's per capita green gas (GHG) emission from energy use is
insignificant.
Nepal has strong reasons to support the Kyoto Protocol. It is the first international
agreement that sets binding targets on developed countries to reduce greenhouse gas
emissions, but none on developing countries like Nepal. When Kyoto comes into force it
means an effective carbon tax will be placed on fuel use, penalizing and making more
expensive those fuels with high greenhouse gas emissions. This surcharge will benefit
Nepal as it will make our own energy sources more competitive.

But before taking any firm decision it’s our duty to understand and analyze, that what
really makes developed countries, MNC to pay for GHG reduction. They are ready to pay
because they have great love for nature and really want to save planet for global warming
or its other hidden reason behind their motive.

As Malaysia’s Prime Minister Mahathir Mohamad said “If the industrialized nations
thought rainforests were so important for biodiversity and carbon dioxide storage why did
not the rich, carbon dioxide producing countries pay for the service of preserving those
forests, instead of bullying poor countries not to utilize one of their few natural
resources.”

Before we enter into debate, we will understand few words very famous recently in this
context.

Global warming is the increase in the average temperature of the Earth's near-surface air
and oceans since the mid-20th century and its projected continuation. Global surface
temperature increased 0.74 ± 0.18 °C (1.33 ± 0.32 °F) during the last century. The
Intergovernmental Panel on Climate Change (IPCC) concludes that increasing
greenhouse gas concentrations resulting from human activity such as fossil fuel burning
and deforestation caused most of the observed temperature increase since the middle of
the 20th century.
An increase in global temperature will cause sea levels to rise and will change the amount
and pattern of precipitation, probably including expansion of subtropical deserts. The
continuing retreat of glaciers, permafrost and sea ice is expected, with warming being
strongest in the Arctic. Other likely effects include increases in the intensity of extreme
weather events, species extinctions, and changes in agricultural yields.

DRAFT
The Kyoto Protocol is a protocol to the United Nations Framework Convention on
Climate Change (UNFCCC or FCCC), an international environmental treaty with the
goal of achieving "stabilization of greenhouse gas concentrations in the atmosphere at a
level that would prevent dangerous anthropogenic interference with the climate system."
The Kyoto Protocol establishes legally binding commitment for the reduction of four
greenhouse gases (carbon dioxide, methane, nitrous oxide, sulphur hexafluoride), and two
groups of gases (hydrofluorocarbons and perfluorocarbons) produced by "annex I"
(industrialized) nations, as well as general commitments for all member countries.

The Clean Development Mechanism (CDM) is an arrangement under the Kyoto

Protocol allowing industrialised countries with a greenhouse gas reduction commitment
(called Annex A countries) to invest in projects that reduce emissions in developing
countries as an alternative to more expensive emission reductions in their own countries.
A crucial feature of an approved CDM carbon project is that it has established that the
planned reductions would not occur without the additional incentive provided by
emission reductions credits, a concept known as "additionality".

The CDM allows net global greenhouse gas emissions to be reduced at a much lower
global cost by financing emissions reduction projects in developing countries where costs
are lower than in industrialized countries.

The clean development mechanism is a global market mechanism in which a developing

country can lower its CO2 emissions on behalf of industrialized countries. The CDM
institutional architecture is complex, involving various stakeholders. Project developers,
Designated National Authorities (DNA), Technology supplier, Designated Operational
entities (DOEs), financial institutions, etc. The executive board is the regulator of the
CDM, usually with a commission of ten members who gives accreditations and mandates
to the DOEs.

At present, developing countries have no obligations to constrain their GHG emissions.

But they are still able, on a voluntary basis, to contribute to global emission reductions by
hosting projects under the Clean Development Mechanism.

The CDM has two key goals:

• To assist developing countries who host CDM projects to achieve sustainable

development;

• To provide developed countries with flexibility for achieving their emission

reduction targets, by allowing them to take credits from emission reducing
projects undertaken in developing countries.

DRAFT
The greenhouse gas benefits of each CDM project will be measured according to
internationally agreed methods and will be quantified in standard units, to be known as
'Certified Emission Reductions' (CERs). These are expressed in tons of CO2 emission
avoided. When the Kyoto Protocol becomes fully operational, it is anticipated that these
'carbon credits' will be bought and sold in a new environmental market; they are already
becoming a commodity.

Each CDM credit – known as a certified emission reduction (CER) – supposedly

represents one metric ton of carbon dioxide not emitted to the atmosphere. Governments
can purchase credits directly or companies can buy them to comply with national-level
legislation. The CERs produced through 2012 are expected to be worth $35-$85 billion.

HOLES

Unfortunately, the CDM is failing miserably and is undermining the effectiveness of the
Kyoto Protocol. Most “emission reduction” credits are “fake,” from projects that do not
actually reduce emissions. Billions of dollars have been transferred from taxpayers to
undeserving project developers and a growing army of carbon brokers and consultants. In
the process, the CDM is not only failing to support climate change mitigation and
sustainable development in developing countries, but also provides industrialized
countries with a way out of meeting their own domestic reduction obligations.

The most basic problem – and indeed the fundamental flaw – with the CDM, as well as
with any project-based offsetting mechanism, is the need to prove the “additionality” of a
project. A project is “additional” if it was only able to go forward because of the extra
carbon credit income from the CDM. Any project registered under the CDM that would
have been built anyway, without carbon credit income, allows an industrialized country to
emit more than their targets, without causing any changes on the ground where the
project is located. In reality, non-additional projects are going forward under the CDM on
a large scale. Researchers estimate the proportion of CDM projects that are truly
additional to be only a fraction of the market. The evidence is clear that the majority of
CDM projects do not actually reduce emissions (are “non-additional”):

75% of all approved CDM projects were already up and running at the time they were
approved. If carbon credit income were really essential for a project to go forward, then
most CDM project developers would need to wait to make sure that their project had
been successfully approved by the CDM Board before beginning construction.

However, as of October 1, 2008, 76% of all approved CDM projects had not only started
construction, but were actually completed and up and running at the time they were
registered as CDM projects.

When asked, numerous CDM project developers admit that they would have built their
projects anyway, regardless of CDM subsidies. Many validators, CDM consultants, and

DRAFT
credit traders, as well as people involved in renewable energy development more
generally, agree that the majority of CDM projects are nonadditional.
Forgery and fraud are common themes discussed in carbon trading conferences and
workshops.

It is often suggested that the CDM’s rules and procedures should be tightened to prevent
non-additional projects from going through. However, efforts to make additionality
testing more rigorous will increase CDM process costs and timeframe, already considered
too cumbersome and long, without resulting in sufficiently accurate additionality testing.
The subjectivity involved in project development, investment and lending decisions
makes an accurate test for project additionality impossible. Each proposed CDM project
is audited by a validator, who, among other criteria, is asked to assess the likely
additionality of the project. Auditors are accustomed to auditing fairly objective criteria,
but there are no accurate objective measures of the intentions of developers, investors and
lenders. Industry representatives have complained that “good story-tellers” can get a
project approved, “while bad story-tellers may fail even if the project is really additional.

Because offsetting mechanisms are measured against a “business-as-usual” baseline

(what would have happened without CDM credits), they risk creating perverse incentives
for governments and individual facilities to maintain high baselines. For example, a
relatively efficient company will be credited with fewer credits for implementing
additional efficiency measures than a company that is historically less efficient which
implements the same measures. There is concern that, ultimately, the CDM could
substantially increase emissions through these perverse incentives, especially by
disincentivizing climate-friendly legislation by governments. Why would a government
voluntarily act to cap methane from its landfills if in doing so it makes these activities
“business-asusual” and therefore not additional and not eligible for CDM income?

One of the purposes of the CDM is to act as a safety valve, as a means of controlling
costs of compliance with the Kyoto Protocol. The two year or more lag between
conceptualization of a
CDM project and the start of credit generation limit the CDM’s effectiveness as a cost-
containment mechanism. This time lag means that the CDM is not quickly responsive to
changes in the supply and demand of CERs.

DRAFT
Conclusion

Rich, developed countries want to continue polluting. They can’t halt their industrialized
system functioning. So they will pay undeveloped poor nations to cut carbon dioxide
emission for them by planting, afforestation and using biomass used technology instead
of fossil fuels.
Though it look like justice to both of them, but its not so. The poor and undeveloped
nations will get nothing at last but will be poorer and with more inefficient technology in
their industry and all natural resources captured by them.
As we all know, poor countries are always self sufficient with corruption. Half the money
will be paid to corrupted officials, corrupt reporters to support their view and lead the
country back to old age and remaining half will be returned back to them via new
technologies and profits from goods which they sell in poorer countries. Where is the
guarantee that Annex I country will not recover there money wasted in CDM project,
from somewhere else in form of extra charge on products, technology, expertise they are
selling, supplying to poor countries.
Our industries will be left with least developed technology with poor performance, forest
and environmental resources freeze, and can no more be used by local people in the name
of carbon reduction.

The other main important issue is monitoring. And to be true no body really cares
whether this all CDM project really reduce carbon dioxide emissions or not. Greenpeace
says the Kyoto targets will produce an actual overall reduction of gases by 1% or 2%
only.
As Guyana’s President Jagdeo says “The Kyoto protocol is limited in that sense and it’s
short-sighted in that it encourages bad behavior basically among countries, if you cut
down trees and you plant them back you get money, if you preserve them, you don’t get
anything.

It is hardly a mature market mechanism due to its short period of existence and CDM’s
flaws are possible.Its time for our politician, experts to think well before taking any firm
decision which might have very bad influence in coming future.

DRAFT
Reference:
1. http://en.wikipedia.org
2. http://www.cdmcapacity.org/what_is_CDM/effect_developing_countries.html
3. http://www.internationalrivers.org/files/FOE%20IR%20CDM%20fact%20sheet%2
0FINAL3,%2010-08.pdf
4. Shaligram Pokharel: Kyoto protocol and Nepal's energy sector
www.sciencedirect.com
5. http://www.nepalitimes.com.np/issue/224/Nation/9913

DRAFT