The Executive Board (EB) of the United Nation’s Clean Development Mechanism (CDM) announced tighter standards and streamlined procedures for the accreditation of third-party certifiers at a recent board meeting in Bonn, Germany, according to Energy Risk. The CDM allows greenhouse gas reduction projects in developing countries to earn certified emission reduction (CER) credits, which are traded and sold, and used by industrialized countries to meet their emission reduction targets under the Kyoto Protocol.
The new processes call for third-party assessors, Designated Operating Entities (DOEs), to be subject to random testing in an effort to speed up their accreditation of projects. The new standard has enabled the EB to almost double its certification services for the 15 types of projects covered under the CDM, according to Energy Risk.
The United Nations claims that the CDM has increased emission-saving initiatives globally. A snapshot of CDM projects to date include 1,527 registered projects, 270,428,991 issued CERs and >1,520,000,000 expected CERs from registered projects by the end of 2012.
However, CDM projects have been criticized around the globe, raising concerns about forged documents, cost-effectiveness of the program, and whether or not it’s increasing emissions initiatives. More concerns were brought to light in a recent New York Times article that says a bad economy coupled with political trends is a threat to the U.N. program, leading many market watchers to speculate that only the World Bank may keep the CDM program going to 2012.
The number of new projects entering the validation process is averaging about 110 per month, down 15 percent from last year’s average of 130 per month, but the number is expected to decrease, reported the New York Times. Only 75 projects were added to the backlog of applications last month.
Market watchers also say it could take a year from start to finish for projects to get awarded CERs, and there are signs that the number of new projects could decline significantly in the near term. There is less need for EU allowances (EUAs) mandated under the EU’s cap-and-trade program and for CERs with a slowdown in the industrial sector cutting down emissions of greenhouse gases, reported the New York Times.
Weak pricing for CERs is a major concern. Jasmine Hyman, director of programs and partnerships at the Gold Standard Foundation, an organization that certifies CERs, told the New York Times that tight credit markets and policy uncertainty are causing prices to fall.
Market tracker for energy and environmental markets Point Carbon recently reduced its carbon emissions forecast by 500 million tons for the period 2008 to 2012, due to a steep decline in industrial production and decreased demand for electricity across Europe. Point Carbon’s EUA price forecast for 2009 now stands at 12 euros per ton, down about 10 euros per ton on the forecast published in November.