India’s plans for a domestic energy efficiency cap-and-trade scheme have raised concerns over how the market for Clean Development Mechanism (CDM) projects will be affected.
Under plans for the scheme, businesses that use more energy can buy certificates from those that have excess. While it seems rules will need to be put in place to ensure an energy efficiency project can’t gain certificates from both this scheme and the CDM, some analysts believe there might be scope for overlap of the two schemes further down the line.
There are concerns the scheme could potentially reduce the incentive for Indian utilities to put forward energy efficiency projects under the CDM, if the credits generated from the new scheme are deemed more valuable.
However, Alessandro Vitelli, the director of carbon research provider IDEAcarbon, doesn’t think the new scheme will impact drastically on the burgeoning CDM market in India. “Relatively few utilities were shopping around for CDM projects in the energy efficiency sector in the first place, so it doesn’t change the game for CDM,” he says. “Energy efficiency is not a sector where many CDM projects usually take place, so I still see there being a lot of scope for CDM in India in other areas such as renewables.”
Chandra Sinha, head of Asia environmental markets at JP Morgan, says there is no relationship between India’s proposed EETS and the CDM. “This is a purely domestic and internal scheme, and has no relationship with the CDM or any other international mechanism,” he says.
Sinha sees no problem with companies operating both schemes in parallel. “It’s a common trend now for different attributes of energy savings being unbundled and sold separately,” he says. “The national benefit of saving energy is totally separate to generating credits from reducing greenhouse gases. It’s just the same as when a company trades both power and CERs, companies will be able to trade energy efficiency credits and CERs simultaneously.” Rest of the article