Are energy efficiency projects feasible under the CDM? A case study on industrial boilers in Peru

Lambert Schneider, Öko-Institut (Institute for Applied Ecology)

Keywords

Kyoto Protocol, flexible mechanisms, Clean Development Mechanism, CDM, energy efficiency, boiler, Peru, baseline, monitoring, Certified Emission Reductions, CERs

Abstract

Energy efficiency projects under the Clean Development Mechanism (CDM) face particular difficulties: The determination of the baseline scenario is more complex, monitoring provisions require the measurement of several parameters, and indirect effects such as rebound effects have to be quantified. Especially small CDM projects have problems to comply with these requirements. As a result, only very few energy efficiency projects have been submitted to the CDM Executive Board up to now.

In this paper, we present the lessons learned from a feasibility study for a CDM project that aims at enhancing energy efficiency in industrial boilers in Peru. The project bundles about 100 boilers in Peru, thereby reducing transaction costs considerably. The institutional framework of the project includes the provision of economic incentives and a program for capacity building. A dynamic baseline is established and simplified monitoring requirements are defined. As part of the feasibility study, the efficiency is measured for about 40 boilers in Peru, energy efficiency improvement measures are identified and CO2 abatement costs are quantified for each measure. With this bottom-up data and statistical data on all industrial boilers in Peru, the potential of the CDM project is estimated and a marginal CO2 abatement cost curve is determined.

Based on the experiences in Peru and of other energy efficiency CDM projects, recommendations are provided on how difficulties in implementing energy efficiency measures under the CDM could be overcome and how transaction costs can be reduced without jeopardizing the environmental integrity of the CDM.