Bhutan may not earn its due from rural electrification, a registered CDM project

Climate: All is not rosy about selling the country’s carbon credits that it generates from clean energy.

Bhutan might have to wait until the new climate change agreement is signed in Paris this December, to trade its carbon credits.  According to international news reports, although the contents of the new agreement are still being discussed, it is expected to bring back the carbon trade market, which has currently collapsed.

Carbon trading is a global system designed to give poor countries access to new green technologies and ensure a flow of finance.  But experts believe that it has “essentially collapsed”, jeopardising future flows of funds to the developing world.

Chief environment officer with National Environment commission’s climate change division, Thinley Namgyel, said if the market doesn’t improve, Bhutan might not earn as much as it expected to from the rural electrification project, which is registered as a clean development mechanism (CDM) project with UN framework convention on climate change (UNFCCC).

“Some carbon trading schemes are expected to come up in the Paris climate change summit, which might bring back the market,” he said.

Bhutan’s rural electrification project got registered as a CDM project recently for reducing carbon emission, after it fulfilled the commitment made at the Kyoto protocol.  It is expected to earn about Nu 3.7M (million)  (56,000 euros) annually starting next year.

CDM project is the biggest trans-boundary CDM activity under UNFCCC.  The mechanism was developed by the UNFCCC under the Kyoto protocol of 1997.  Under the protocol, countries committed themselves to reduce their overall emission of six greenhouse gases by at least five percent.

The Paris summit in December 2015 will bring 196 countries together to sign a new climate change agreement.

Director of renewable energy department, Karma Tshering, said anything earned out of carbon trading mechanism is additional revenue for the country.

“If we’re absolutely sure that we can’t sell carbon credits, we’ll not certify it, which means we don’t spend on verifying it,” he said. “That doesn’t mean our CDM project has failed. CDM project once registered is valid for seven years.”

He added that the cost was incurred only if the carbon credits were verified and certified, which needed hiring an international consultant.  It cost about USD 15,000 to hire a regional consultant to verify one year’s data.

If the carbon trading market is not desired, countries can choose to not sell credits that year.  Carbon market mechanism is unpredictable.

Bhutan has four CDM projects.  Both Punatsangchu hydroelectric projects I and II are registered CDM projects that will give credit in millions, according to the director.  Similarly Dagachu also is a large-scale CDM project.

Sometime in 2007 Bhutan traded carbon credits with the Japanese government from a small project in Chendebji, Trongsa for two years.  Credits were traded for about 12,000 euros then.  The project was not feasible, since the credit generated was not huge in volume.

“It would have run into negative revenue,” director Karma Tshering said.

He said carbon-trading market has collapsed currently because, at present, there are many carbon emission reduction projects.  CDM is just one of them.

He explained that a lot of cost is incurred to register a project with UNFCCC as a CDM project.  It includes field visit, hiring consultant to design the project with technical documents, validation by a third party and community consultation, among others.

“It’s not easy to get CDM project registered,” the director said.

By Nirmala Pokhrel