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The Clean Development Mechanism (CDM), set up under the 1997 Kyoto Protocol, is a co-operative mechanism aimed at helping industrialized countries to achieve their greenhouse gas (GHG) emission targets under the Protocol and simultaneously assist developing countries to achieve sustainable development. If biofuel can be developed through CDM in developing countries, it has several potential merits (Bakker, 2006). First, CDM offers an incentive to implement climate-friendly projects. Second, project investors can sell the certified emission reductions (CERs, 1 CER = 1 tonne of CO2) to industrialized countries. Third, co-operation between developed and developing countries may offer financial benefit, attract loans, and transfer of technology. Additionally, Gnansounou et al. (2005) pointed out that biofuel development may support the development of agriculture by providing rural people with additional incomes, creating new employment opportunities, and reducing local atmospheric pollution, hence promoting sustainable development. This implies that biofuel projects potentially qualify for CDM projects because they satisfy the dual goals of CDM. Considering these points, CDM should have had significant effects on the development of biofuel. As a matter of fact, however, this has not become a reality.
Up until mid-2006, over 800 projects were at the stage of validation under CDM, but none of these were biofuel projects. The number of CDM projects has been increasing fast. The CDM pipeline prepared by Capacity Development for CDM (2008) indicates that up to 1 May 2008, there had been 3,403 projects at the stage of CDM validation, and these projects will account for 2.57 million kilo-CERs in 2010. Among these projects, there were 531 biomass energy projects; six of them were biodiesel projects, but still there were no bioethanol projects in the CDM project portfolio.
Up to May 2008, the only baseline methodology for biofuel projects that had been approved by CDM Executive Board was for the production of biodiesel based on waste oils and/or waste fats of biogenic origin. This implies that the limited number of biofuel projects included in the CDM project portfolio is caused by the fact that no crop-based biofuel baseline methodology has been approved by the CDM Executive Board. Aside from baseline and monitoring methodology, the other barriers to the inclusion of biofuel projects in the CDM project portfolio include calculation of the GHG reduction, and high abatement costs (Bakker, 2006).
The International Energy Agency (IEA, 2004) found that the CO2abatement cost for both biodiesel and ethanol for most regions are estimated to be higher than US$ 100/tCO2 equivalents, with Brazil an exception (between US$ 10-30/tCO2-equivalents). Compared with current CER prices, which are in the range of €5-20 /tCO2-eq (Bakker, 2006), the current abatement cost is so high that investors are not attracted to investment in biofuel CDM projects. In the case of Thailand, for example, cassava-based ethanol has a GHG abatement cost of US$ 99/tCO2. Regardless of the high abatement costs, Nguyen (2007) found that cassava-based ethanol would be a good substitute for gasoline and it is effective in fossil energy saving and GHG reduction.
Experience from Brazil indicates that CDM is not a necessary condition for the development of biofuel. Brazil's programme of bioethanol development in the mid-1970s was criticized as being uneconomic, but today the ethanol industry is recognized as an efficient sector that brings substantial benefits to the Brazilian economy. The success stems from several factors such as the availability of abundant agricultural land and an appropriate climate for sugar cane, sugar mills that can produce both ethanol and sugar, significant improvements in sugar production and ethanol processing, and crucial institutional support. Moreira (2006) pointed out that the most important policies behind the Brazil's success were: the requirement that the auto industry produce cars that use blended biofuels; subsidies for biofuels during initial market development; the opening of the electricity market to renewable energy-based independent power producers in competition with traditional utilities; support for private ownership of sugar mills which helps guarantee efficient operations; and stimulation of rural activities based on biomass energy to increase employment in rural areas.
The IEA projected that biofuels would be competitive with petroleum at petroleum prices of more than US$ 60 a barrel. Since this point has been reached, many countries will strive for biofuel development. Although CDM is not a necessary condition for biofuel development (at least in the case of Brazil) it may become one of several conditions for other countries, because if biofuel projects are certified by the CDM Executive Board, the certified emission reductions (CERs) can be sold to industrialized countries, and this will significantly contribute to the GHG reduction. Therefore, the CDM Executive Board has to find ways of eliminating barriers for biofuel projects to be included in the CDM portfolio.
Written by Masdjidin Siregar, Consultant, UNESCAP-CAPSA, Bogor, Indonesia. |
