The chances for end-use energy efficiency projects under Joint Implementation and CDM: bleak or sunny?

Panel: Panel 6: Energy Efficiency Under Joint Implementation & The Clean Development Mechanism

Authors:
M.T. van Wees, Netherlands Energy Research Foundation ECN
K.E.L. Smekens, Netherlands Energy Research Foundation ECN
J.P.M. Sijm, Netherlands Energy Research Foundation ECN

Abstract

Joint Implementation JI and the Clean Development Mechanism CDM promote greenhouse gas emission (GHG) reduction projects because the sale of emission reduction credits provides an additional financing source. In current JI and CDM schemes, projects in energy production and conversion are preferred, although projects to improve end-use (or demand-side) energy efficiency could also be a technically and economically feasible alternative for GHG emission abatement.

The chances of end-use energy efficiency projects under the JI and CDM mechanism are investigated by addressing the following questions:

What are the potential and incremental costs for GHG emission reduction of end-use energy efficiency projects in comparison to energy supply and conversion?
Are end-use energy efficiency projects more expensive, leading to relatively high costs for the emission reduction credits compared to supply projects? What are the transaction costs for implementing these projects under a JI/CDM scheme, particularly for validation, monitoring and verification?
Do difficulties in project development and financing put energy efficiency projects at a disadvantage?
Are the chances of energy efficiency projects in CDM better than in JI given the additional criteria for project selection in CDM, such as the contribution to sustainable development?

In answering these questions, the paper combines theoretical analysis as well as empirical evidence from the existing JI and CDM initiatives. The paper concludes on the chances of end-use energy efficiency projects in JI and CDM under the international regulatory framework after CoP6 in competition with other project types, particularly energy supply projects. These chances are at the moment not favourable. Recommendations are given on the possibilities of designing JI and CDM tenders in such a way that these chances are improved.