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The Clean Development Mechanism: A Field Guide for Transport Projects
| Date: | January 2013 |
| Type: | Papers and Briefs |
| Series: | South Asia Operational Knowledge Working Papers |
Description
Transport contributes to about 23% of global CO2 emissions, a level that is predicted to keep growing. Based on current trends, the world’s share of GHG emissions derived from transport could be as high as 50% by 2030. The Clean Development Mechanism (CDM) of the United Nations Framework Convention on Climate Change (UNFCCC) was developed to combat climate change by providing additional finance to encourage the reduction of carbon dioxide (CO2) emissions. Yet, transport comprises only 0.3% of all registered CDM projects, mainly because of the complex and time-consuming procedures required for quantifying emission reductions and fulfilling UNFCCC requirements.
ADB's Strategy 2020 and Sustainable Transport Initiative acknowledge the role of the transport sector in climate change and this field guide has been developed to share the basic ideas and concepts of application, development, and approval process of the CDM for transport projects with the hope to expand the currently limited knowledge of the issue and encourage more transport projects to take advantage of this mechanism.
Findings
The income generated from trading certified emission reductions (CERs) can be quite attractive, based on the scale of the project, and can contribute to meeting maintenance costs. While carbon finance will not cover investment costs, it can introduce a significant inflow of money in the long run, making a project more sustainable, financially attractive, and less prone to stalling due to funding deficits. Access to carbon finance requires time, up-front investment, and a long-term horizon. The risk of non-approval or lower-than-expected returns is omnipresent. However, some project developers cover these risks and realize projects based on a share of CERs, shouldering all upfront costs and fees, and thus effectively reducing owner-risk to zero. Technical and financial resources can also be sourced within ADB.
Aside from the financial benefits, the involvement of a project in CDM helps to demonstrate clearly that the project has a low-carbon impact.
Contents
- Foreword
- Introduction
- CDM Organizational Set Up
- Processes
- Current Status of CDM in the Transport Sector
- Conclusion and Discussion
