Lunch debate: JI and CDM combine sustainability and development

JI and CDM combine sustainability and development
e5 Lunch debate in the EU Parliament

Brussels on December 2nd, 2003


How can the proposed CDM/JI linking directive achieve both climate protection and poverty alleviation? This was the key question of a lunch debate on the topic “JI and CDM as an opportunity to close the technological gap between rich and poor countries?”. The EU parliamentarian Dr. Rolf Linkohr had invited 22 business representatives and members of the European Parliament (MEP) to join a two hour lunch in Brussels on 2nd December, 2003. e5 organised the event, the Danish Vestas Group was the sponsor.

The linking directive on the Kyoto mechanisms will hopefully pass parliament in spring 2004. e5 took the opportunity to lobby for the interest of its members and sharpen the parliamentarians’ view on the practical aspects of the Kyoto mechanisms.

Linkohr brought up the business potential that the mechanisms inhere when he quoted a study from the EU research centre in Sevilla. It figures the CO2 trade volume at 80 Billion €. What does e5 do to encourage JI and CDM projects that foster both the economy and the environment, Linkohr asked. Delia Villagrasa from e5 pointed to three core issues: first, e5 particularly supports high quality energy projects rather than controversial projects such as sinks. Secondly, e5 emphasises the importance of small scale projects; their impact at community level would often back economic development in developing countries better than high-tech mega-projects that do not fit local know-how. Thirdly, e5 supports a JI/CDM framework that lowers transaction costs and keeps administrative procedures transparent and easy. Such conditions would stimulate investment. Thus, the proposed directive should provide for a quick start of small scale projects, e.g., by standardising procedures and bundling projects. Also, developing countries would probably easier participate when CDM rules were not knitted tighter than those for national emission reduction projects.

With the forthcoming EU emission trading system, the EU becomes a forerunner, as it faces climate change with market instruments. Villagrasa concluded that JI and CDM regulation providing investment security and effectiveness would bring European companies in a position ahead of global competitors, giving them the chance to take the lead. Helma Kip from Essent Energie, Netherlands, added that CDM projects should mainly include energy production, as this branch would emit most CO2. European companies would surely have both the capacity and the will to transfer technology via the CDM. Yet, as long as clear rules and standards lack, there would be no action. It would not primarily matter how vigorous the rules were; crucial for long term investment abroad are reliable conditions and secure standards, Kip addressed the parliamentarians. Aidan Cronin from Vestas Wind Systems, Denmark, enhanced the importance of transparency within CDM and JI ruling. Otherwise, transaction costs would increase and could nip a project in the bud.

The present indefinity of the price for a CO2 ton should not really cause concern, Kip continued. Both five and 20 € would spur the CDM market – either way, a coal fired power plant would have to bear higher decarbonisation costs than, e.g., a gas fired station. Besides, governments could increase or lower the volume of allowances for emissions trading by adjusting national allocations, added Sebastian Gallehr from e5. This would also impinge on the price of a CO2 ton.