Think Global, Act Local?

ff

Freie Universität Berlin

Fachbereich Politik- und Sozialwissenschaften

Otto-Suhr-Institut für Politikwissenschaft

Diplomarbeit

zur Erlangung des akademischen Grades

Diplom-Politologe (Dipl.-Pol.)

am Otto-Suhr-Institut für Politikwissenschaft

der Freien Universität Berlin

» Think Global, Act Local? «

Domestic Politics in the Philippines and their Impact on

Implementing the Clean Development Mechanism

Linking Local Renewable Energy Projects to Global Regime Effectiveness -

a Comparative Approach with India and China

submitted by

Jens Marquardt

submitted to

Prof. Dr. Miranda Schreurs

and

Dr. Marianne Beisheim

Berlin, February 17th 2010

Diploma Thesis | Think Global, Act Local? The Effectiveness of the CDM Regime in the Philippines, India and China

© 2010 | Free University Berlin | Otto Suhr Institute for Political Science i

“States shall cooperate in a spirit of global partnership to conserve, protect and restore the

health and integrity of the Earth's ecosystem. In view of the different contributions to global

environmental degradation, States have common but differentiated responsibilities. The

developed countries acknowledge the responsibility that they bear in the international

pursuit to sustainable development in view of the pressures their societies place on the

global environment and of the technologies and financial resources they command.”

Rio Declaration 1992, Article 7.

“In a way you could say that Copenhagen didn’t produce the final cake, but it left countries

with all the right ingredients to bake a new one in Mexico. [...]“ If countries follow

Copenhagen’s outcomes calmly, with their eyes firmly fixed on the advantage of collective

action, they have every chance of completing the job.“

Yvo de Boer, UNFCCC Executive Secretary, 20.1.2010.

Think Global, Act Local? The Effectiveness of the CDM Regime in the Philippines, India and China

ii Otto Suhr Institute for Political Science | Free University Berlin | © 2010

:: Executive Summary

Think global, act local!1 This idiom illustrates that international agreements cannot solve any global

environmental problems without concrete actions on the ground. Climate change in this respect is a

challenge for the international community as well as for national and local actors. This paper

examines the impact of domestic politics on the effectiveness of an international regime like the

Clean Development Mechanism (CDM). It will focus on renewable energy (RE) projects in the

Philippines, and includes a comparative perspective with experience from India and China. The

following research question will guide us through this research:

How far can renewable energy projects under the Clean Development Mechanism and

domestic political conditions in the Philippines influence each other to promote the

effectiveness of the global CDM regime compared to experiences from India and China?

Taking this as a starting point, two fundamental sub-questions will be discussed in this paper:

1. Can the CDM be described as an effective global regime in the field of renewable

energy with effects going beyond concrete projects on the ground?

2. How do national and sub-national politics, policy and polity interact with the global

CDM regime and do they matter to promote the effectiveness of the CDM?

With concrete projects in developing countries the CDM regime aims to fulfil two major goals:

reducing greenhouse gas emissions and promoting sustainable development (SD). This thesis will go

further and raise the question if the CDM is effective. Effectiveness will be a comprehensive

approach consisting of three factors: the potential of the CDM to 1) overcome barriers for RE

sources, 2) promote SD and 3) lead to political action beyond the projects in the host country. The

dependent variable “effectiveness” should be explained by various indicators including national CDM

institutions, RE legislation, the energy sector of the host country and local political conditions.

It took a long time for the world community to pay attention to the issue of climate change.

Scientific reports from the IPCC eventually led to the creation of the UNFCCC in 1992. Since then,

1 See Annex 1 of this paper for the origin and the meaning of the term “Think Global(ly), Act Local(ly)!”

CDM projects on the ground and

interviews in the Philippines

Implementing renewable energy

in developing countries

The CDM as a global regime

Experience from CDM projects in

the Philippines + India and China

Four projects have been visited and further

interviews conducted for empirical data.

Barriers from a sample of renewable energy projects from every country have

been examined.

An analytic framework on barriers for RE in

developing countries has been developed.

Theoretical work on the links between domestic

politics and international regimes was examined.

> Figure 0.1: Promoting Renewables through the CDM: Theory and Practise

global

local

Source: Illustration by the author.


© 2010 | Free University Berlin | Otto Suhr Institute for Political Science iii

international climate negotiations are on the agenda and a differentiation between developing and

developed countries can be observed. Developing countries are not a homogenous group, but they

formulate a common demand for SD. RE technologies are one incentive to integrate these countries

into climate talks. However, technology transfer is not a simple issue, as this work reveals.

Four central groups of actors (national governments, international institutions, private and non-

state actors) can promote the diffusion of RE and six categories of barriers (political aspects,

intellectual property rights, local capacity, financial, social and technical aspects) form the

analytical framework for the case studies. The CDM is designed to overcome these barriers. Every

project needs to prove additionality, saying that it would not have been realized due to various

barriers without incentives from the CDM. The CDM itself also faces various social, technical and

political barriers – including missing local capacity and CDM infrastructure in the host countries.

Furthermore, SD benefits from RE projects do not lead to additional financial rewards. Small scale

RE CDM projects face high transaction costs and reduce CO2 emissions with a relatively low global

warming potential. All in all, the introductory chapter reveals that the CDM has the potential to

integrate developing countries into climate mitigation efforts and lowers key barriers for

renewables, but fails to act as a catalyst for widespread sustainable development.

The second part of this work deals with the theoretical framework. Starting with the unsatisfactory

puzzle that regime theory is not sufficient to handle the complex interrelations between an

international regime and the domestic sphere we will develop a three dimensional framework based

on various theoretical ideas, taking the local, national and international level into account. On the

one hand, domestic constraints, interests, political institutions and the distributions of information

influence international negotiations and the process of implementation. The involvement of

affected groups and especially private actors can increase the effectiveness of the regime as well as

nonbinding aspects that are easier to implement in tandem with binding measures. On the other

hand, internationalization affects the constraints and opportunities for various actors, potentially

undermines the autonomy of the national government and might boost reforms. International

institutions can furthermore change the national political environment, raise concern and develop

national policies. Effective institutions penetrate the state politically to a high degree; they lead to

a high level of governmental concern, a hospitable contractual environment and sufficient political

capacity on the national level. Finally, local politics matter to understand interactions during

implementation. Experimentation on the ground might provide experience for a broader

dissemination of successful innovations to influence national and even international levels. Good

multilevel climate change governance includes a strong national political framework, the local level

as a testing ground and collaborative capacity building. To put it in a nutshell, regime theory is not

enough to explain the effectiveness of the CDM. A multilevel approach of political interactions

is needed focusing on the meaning of the local level during implementation.

The impact of domestic politics is firstly examined in the case of the Republic of the Philippines, a

climate hotspot with high vulnerability, low adaptive capacity and climate change as an important

political issue. It is in the country’s own interest to take action against global warming, implement

climate-friendly legislation and cooperate with other actors under the umbrella of the CDM, as


iv Otto Suhr Institute for Political Science | Free University Berlin | © 2010

wind, hydro and geothermal power show huge potentials in the Philippines. Applying the general

framework of RE barriers reveals a number of political, social and economic problems, although the

Philippines already have a wide mix of RE sources and developed a strong national legislation for

renewables over time. Implementation depends on local government units and private actors.

Corruption, undemocratic structures and a lack of local capacity counteract ambitious

environmental protection plans and lead to ineffective implementation. This is also true for CDM

projects: On the one hand, national policies and a strong institutional framework support the CDM.

On the other hand, subsidies for fossil fuels and unequal market chances in the mostly private-

owned energy sector, strong scepticism about uncommon technologies, and missing local capacity

represent critical barriers on the ground. CDM projects in the Philippines are effective as they

demonstrate feasibility of pilot projects and show benefits for the local population. However,

effects do not lead to nationwide political change. Especially the four detailed case studies show

that CDM projects can promote SD only to a certain point. They might be sustainable, progressive,

and community supportive, but almost no spill-over effects can be observed. The criterion of

additionality creates a serious contradiction: Since the Philippines implemented stronger legislation

with the Renewable Energy Law, CDM projects struggle to prove additionality. Paradoxically,

climate-friendly legislation can be a threat for potential CDM projects.

The Republic of India and the People’s Republic of China dominate the CDM market accounting

for 63 percent of all projects. Both coal-centred energy markets show high emissions and potentials

for RE. China and India show similar economic progress, but they differ with regard to their political

constitution as well as their CDM structure. SD for both countries means above all economical

development. The comparison with India and China reveals that CDM effectiveness is similarly

low despite very different domestic political framework conditions.

The democratic and federal Republic of India has a central government, but powerful and

relatively autonomous States with broad competencies in the energy sector. Traditional village

councils are furthermore directly involved in the implementation of rural projects. Supportive

national legislation for RE exists since 2003, but remains hard to implement due to the number of

actors involved on the national and sub-national level. RE projects face various political barriers:

The energy sector, competing authorities both at the national and the State level and a lack of

awareness are critical. Inconsistent implementation and coordination of national policy on the State

level, unpredictable policy changes and a fossil fuel dominated energy sector are the major barriers

according to a sample of 50 CDM projects. Most projects claim to promote SD with benefits for the

environment and the local population. Broader political and technological impacts are relatively

rare. Promotional Centres on the State level have a high stake in the CDM.

In 2009 the centrally planned People’s Republic of China was among the ten countries most

affected by climate change. China’s development leads to a huge increase in energy demand with

high reduction potentials for RE projects and the chance for international cooperation. However,

barriers remain, e.g. missing subsidy schemes, insufficient research and development, and a lack of

support from grid companies. Apart from CDM structures and regulations China’s institutions lack

democratic legitimacy, and the country is considered to be an authoritarian system. As provincial


© 2010 | Free University Berlin | Otto Suhr Institute for Political Science v

autonomy is bigger that the structure might suggest, political success and effective implementation

needs cooperation with regional and local authorities. The Chinese economy leaves room for private

actors and sees the CDM as an important mechanism for SD. China established national and

provincial authorities to provide training and assist project implementation. In a sample of 50 CDM

projects only a few project developers mention political and social barriers like high bureaucracy

and poor regulations that could be overcome with the CDM. Especially wind and hydro power

projects concentrate on financial problems and skip an analysis of social, technical and political

barriers. Most projects claim benefits for the environment and the livelihood of the people, but

commitments to SD are not very specific. Only two out of 50 projects involve capacity building.

Almost no wind or hydro project engages technology transfer; some are even criticised not to be

“additional” due to positive regulatory conditions and revenues. China’s Designated National

Authority (DNA), responsible for the CDM, is located in a powerful planning agency.

India and China have good natural, but poor political conditions for renewables with barriers for

CDM projects both on the national and the local level. RE sources cannot compete with fossil fuels

and the increasing energy demand. The different political framework conditions in India and China

seem to have only little effect on the CDM. Although both countries vary greatly with regard to their

political environment, India and China face similar barriers and are equally attractive for the CDM.

Experiences from China and India lead to the conclusion that the CDM basically works as a market

mechanism with only little impact on the political environment. Hundreds of CDM projects exist in

India and China already, but their impact on national energy supply is very little. They might at

least give incentives for RE policy that is just being developed in both countries. Furthermore, the

projects’ concrete impact on SD is often hard to define. In China there do not even exist specific SD

criteria. This seems to be rational since project developers can chose their location globally and

seek to avoid additional costs for SD. Despite widespread implementation and greater

availability, CDM project samples from India and China reveal less technology transfer and

commitments to sustainable development than in the Philippines.

In theory, cooperation between developed and developing countries in the area of RE holds the key

for global climate protection. CDM projects demonstrate feasibility of RE technologies in developing

countries. Yet, any further (political) commitment is rare and the CDM lacks to promote SD and

political change. Quite the opposite is the case: The new Renewable Energy Law in the Philippines

for example provides substantial incentives for RE sources. This makes it now harder for CDM

project developers to prove additionality of their projects. The effectiveness of the CDM is

constrained to overcome financial barriers and can even be a barrier for further political

change. The mechanism promotes technology transfer in developing countries like the

Philippines, but shows fewer incentives in India and China. National and especially local political

conditions are relevant for a successful implementation - in the Philippines more than in China and

India – and they could even increase effectiveness. This however is hard to achieve as long as the

CDM itself remains a barrier to further political commitments for RE in developing countries.


vi Otto Suhr Institute for Political Science | Free University Berlin | © 2010

:: Index

Executive Summary ii-v

Index vi-viii

List of Figures ix

List of Acronyms and Abbreviations x-xi

1 Introduction 1-4

1.1 Framing the Topic: Overview and Puzzle 1

1.2 Research Design and Relevance 2

1.3 Definitions, Structure and Methodology 3

2 Background: Developing Countries and Climate Change 5-22

2.1 Developing Countries and International Climate Negotiations 6

2.2 Promoting Renewable Energy in Developing Countries 8

2.3 The Clean Development Mechanism under the Kyoto Protocol 13

2.3.1 From Theory into Practice: How the Mechanism Works 13

2.3.2 Barriers to CDM Projects and Global Distribution 16

2.3.3 Renewable Energy: General Barriers and Perspectives under the CDM 19

3 Theory: International Regimes and Domestic Politics 23-44

3.1 Theoretical Background: Effectiveness of Environmental Regimes 23

3.1.1 Polity, Politics and Policy: The Complexity of Political Dimensions 23

3.1.2 Effective Implementation of International Environmental Commitments 25

3.1.3 Defining the CDM as an International Regime 29

3.2 Three Dimensions of Interaction: International, National and Local 32

3.2.1 Beyond Bargaining: How Domestic Politics Affect Implementation 33

3.2.2 The Impact of Internationalization on Domestic Politics 36

3.2.3 Bringing the Local Level Into Account 40

3.3 Synthesis: Towards a Three-Dimensional Approach 43


© 2010 | Free University Berlin | Otto Suhr Institute for Political Science vii

4 Domestic Politics: The Republic of the Philippines 45-73

4.1 The Political Dimension of Climate Change 45

4.2 Domestic Politics and Renewable Energy in the Philippines 47

4.2.1 Political and Socio-Economic Framework Conditions 48

4.2.2 Potentials for Renewable Energy Sources in the Philippines 50

4.2.3 The Energy Sector: Laws and Regulations (Policy) in the Philippines 52

4.2.4 Promoting Renewable Energy: Actors (Polity) and Processes (Politics) 54

4.3 Implementing the CDM in the Philippines 56

4.3.1 Changing the Political Environment: New Authorities and Regulations 56

4.3.2 Implementation Rules and Procedures 58

4.3.3 Renewable Energy Project Activities in the Philippines 58

4.4 Experiences from the Ground: CDM Projects in the Philippines 62

4.4.1 Makati South Sewage Treatment Plant Upgrade (Philippines BioSciences) 63

4.4.2 NorthWind Bangui Bay Project (NorthWind Power Development Corp.) 64

4.4.3 Quezon City Controlled Disposal Facility (Payatas) 66

4.4.4 San Carlos Renewable Energy Project (Bronceoak Inc.) 67

4.5 Synthesis: About the Effectiveness of the CDM in the Philippines 69

5 Comparison: CDM Projects in India and China 74-101

5.1 Promoting Renewable Energy Through the CDM in India 76

5.1.1 Potentials and Framework Conditions for Renewables in India 77

5.1.2 The Energy Sector in India: Policy, Polity and Politics 80

5.1.3 Implementing CDM Projects in India 83

5.1.4 Renewable Energy CDM Projects in India: Barriers and Perspectives 84

5.2 Promoting Renewable Energy Through the CDM in China 87

5.2.1 Potentials and Framework Conditions for Renewables in China 89

5.2.2 The Energy Sector in China: Policy, Polity and Politics 92

5.2.3 Implementing CDM Projects in China 95

5.2.4 Renewable Energy CDM Projects in China: Barriers and Perspectives 96

5.3 Synthesis: About the Effectiveness of the CDM in India and China 99

6 Conclusion and Perspectives 102-113

6.1 Comparison: CDM Effectiveness in the Philippines, India and China 102

6.2 Think Global, Act Local? Three Levels of Interaction 107

6.3 Final Remarks, Limitations and Further Research 112


viii Otto Suhr Institute for Political Science | Free University Berlin | © 2010

Literature and References 114-127

Interviews, Events and Project Case Studies 128-129

Appendix 130-165

Annex 1 “Think Global(ly), Act Local(ly)!” - Meaning and Origin 130

Annex 2 Developing Countries and Climate Technology Transfer 131

Annex 3 (a-c) UNFCCC and Kyoto Protocol: Excerpts and Parties 134

Annex 4 Rules and Procedures: How the Clean Development Mechanism Works 139

Annex 5 Renewable Energy: Availability and Projects under the CDM 140

Annex 6 Climate Change and Multilevel Governance: Key Actors,

Functions and Tools 143

Annex 7 CDM Project Design Document (PDD) Form, Version 03 144

Annex 8 Environmental Vulnerability Index 2004 and Environmental

Performance Index 2008 146

Annex 9 Environmental Performance Index 2010 Country Profiles

(Philippines, India and China) 147

Annex 10 IEA Renewable Energy Database: Philippines, India and China (table) 150

Annex 11 Energy Supply and CDM Approval in the Philippines 152

Annex 12 CDM Eligibility and Approval Criteria for the Philippines 153

Annex 13 CDM Projects in the Philippines: Barrier Analysis and Sustainable

Development (sample) 154

Annex 14 Pictures from CDM Project Case Studies in the Philippines 156

Annex 15 Total Primary Energy Supply (TPES) in India and China 158

Annex 16 CDM Eligibility and Approval Criteria for India 159

Annex 17 CDM Projects in India: Barrier Analysis and SD (sample) 160

Annex 18 CDM Projects in China: Barrier Analysis and SD (sample) 163

Affidavit / Eidesstattliche Erklärung 166


© 2010 | Free University Berlin | Otto Suhr Institute for Political Science ix

:: List of Figures

Executive Summary

Figure 0.1: Promoting Renewables through the CDM: Theory and Practise ii

Chapter 1 - Introduction

Figure 1.1: Dependent Variable and Explaining Factors 3

Chapter 2 - Background: Developing Countries and Climate Change

Figure 2.1: National Policy to Promote Renewable Energy (table) 9

Figure 2.2: Barriers for Renewable Energy Technologies 12

Figure 2.3: Global Distribution of Registered CDM Projects (map) 16

Chapter 3 - Theory: International Regimes and Domestic Politics

Figure 3.1: Forms and Characteristics of Political Dimensions 24

Figure 3.2: Areas for the CDM to Influence Political Decisions 24

Figure 3.3: Three Criteria of Effectiveness and Various Indicators 29

Figure 3.4: Three Dimensions of Interactions 43

Figure 3.5: Independent and Dependent Variables of this Thesis 44

Chapter 4 - Domestic Politics: The Republic of the Philippines

Figure 4.1: CDM Projects in the Philippines: Location of the Case Studies (map) 62

Figure 4.2: Wilkins’ Analytical Framework Applied to the Philippines 70

Chapter 5 - Comparison: CDM Projects in India and China

Figure 5.1: CDM Projects in India (map) 83

Figure 5.2: Wilkins’ Analytical Framework Applied to India 87

Figure 5.3: CDM Projects in China (map) 95

Figure 5.4: Wilkins’ Analytical Framework Applied to China 98

Chapter 6 - Conclusion and Perspectives

Figure 6.1: The Effectiveness of the CDM Regime 106

Figure 6.2: Three Dimensions of Interactions under the CDM Regime 109

Figure 6.3: Dependent Variable and Explaining Factors 111

For further figures see Annex 1 – 18 at the end of this paper.


x Otto Suhr Institute for Political Science | Free University Berlin | © 2010

:: List of Acronyms and Abbreviations

ADB Asian Development Bank

BAU Business As Usual Scenario (in the absence of the CDM project)

BMU Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit (German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety)

BMZ Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung (German Federal Ministry for Economical Cooperation and Development)

CCP Communist Party of the People’s Republic of China

CCS Carbon Capture and Storage

CDM Clean Development Mechanism

CMD EB Executive Board of the Clean Development Mechanism under the UNFCCC

CER Certified Emission Reduction Unit

CH4 Methane

CIGAR Covered In Ground Anaerobic Reactor

CO2 Carbon Dioxide

CMP Conference of the Parties serving as the Meeting of the Parties

COP Conference of the Parties (supreme decision-making body under the UNFCCC)

DENR Department of the Environment and Natural Resources of the Philippines

DNA Designated National Authority (for the CDM)

DOE Department of Energy of the Philippines

EB Executive Board (of the CDM)

EGTT Expert Group on Technology Transfer (under the UNFCCC)

ENVIS Environmental Information System (in India)

EPI Environmental Performance Index

EPIMB Electric Power Industry Management Bureau of the Philippines

EPIRA Electric Power Industry Reform Act (in the Philippines)

ERC Energy Regulatory Commission of the Philippines

EREC European Renewable Energy Council

ESI Environmental Sustainability Index

EU European Union

GDP Gross Domestic Product

GEF Global Environmental Facility

GHG Greenhouse Gas

GTZ Gesellschaft für Technische Zusammenarbeit (German Tehnical Cooperation)

GW (GWh) Gigawatt (Gigawatt Hour) with Watt as a unit of power

HDI Human Development Index

HFCs Hydroflourcarbons

IACCC Inter-Agency Committee on Climate Change (in the Philippines)

IEA International Energy Agency

IETA International Emissions Trading Association

IGES Institute for Global Environmental Strategies

IPCC Intergovernmental Panel on Climate Change

IPR International Property Rights


© 2010 | Free University Berlin | Otto Suhr Institute for Political Science xi

JI Joint Implementation

KP Kyoto Protocol

kW (kWh) Kilowatt (Kilowatt Hour) with Watt as a unit of power

LDC Least Developed Country

LGUs Local Government Units in the Philippines

MDG Millennium Development Goal

MMBFOE Million Barrels of Fuel Oil Equivalent

MNRE Ministry of New and Renewable Energy in India

MTOE Million Tons of Oil Equivalent

MW (MWh) Megawatt (Megawatt Hour) with Watt as a unit of power

NCCC National Coordination Committee on Climate Change (in China)

NCDMA National Clean Development Mechanism Authority (DNA of India)

NDRC National Development and Reform Commission (in China)

N20 Nitrous oxide

NGO Non-Governmental Organization

NPC National People’s Congress (in China)

OECD Organization for Economic Cooperation and Development

PDD Project Design Document (mandatory for every CDM project)

PFCs Perflourcarbons

PhilBio Philippines BioScience Corporation (CDM project developer)

R&D Research and Development

RE Renewable Energy

REN 21 Renewable Energy Policy Network for the 21st Century

RET Renewable Energy Technologies

SBSTA Subsidiary Body for Scientific and Technical Advice (under the UNFCCC)

SD Sustainable Development

SERC State Electricity Regulatory Commission(s) in India

SF6 Sulphur hexafluoride

SHP Small hydro plant

TPES Total Primary Energy Supply

TERI Tata Energy Research Institute

UNCED United Nations Conference on Environment and Development

UNCTAD United Nations Conference on Trade and Development

UNDP United Nations Development Program

UNEP United Nations Environmental Program

UNFCCC United Nations Framework Convention on Climate Change

USA United States of America

USD United States Dollar(s)

WCED World Commission on Environment and Development

WMO World Meteorological Organization


© 2010 | Free University Berlin | Otto Suhr Institute for Political Science 1

1 Introduction

„No one country can win the battle against climate change acting alone.

Collective action is not an option but an imperative “2

1.1 Framing the Topic: Overview and Puzzle

Climate change has become a major concern of our time. Global warming affects ecological issues

and the natural environment as well as the daily life of millions of people. Some island nations

already struggle to survive due to sea-level rise. Effective action against climate change needs

global cooperation and the involvement of all countries, no matter if developed or developing.3 This

is a challenging task for the world community as the complex negotiations under the United Nations

Framework Convention on Climate Change (UNFCCC) in Copenhagen have just shown.

In 1997, industrialized countries agreed to reportable, measurable and verifiable greenhouse gas

emissions reductions until 2012. Today, political pressure on developing countries has increased and

scientific evidence shows that dangerous anthropogenic climate change can only be solved with

serious commitments from all parties. A global compact for international cooperation and a strong

regime promoting climate-friendly action is needed to address the issue of climate change.

Developing and developed countries do already cooperate under the existing Kyoto Protocol and

climate-sound technologies are implemented under the Clean Development Mechanism (CDM). The

working procedures are simple: An industrialized country or private actor invests in the developing

world to reduce greenhouse gas emissions and receives credits for its own record in return. CDM

capacity in developing countries has been established and should lead to concrete action countering

climate change – at least in theory. Two puzzling observations dominate the practice:

1. More than 2,000 CDM projects all over the world have been registered already with 3,000

further ones in the pipeline. At the same time developing countries criticize the unequal global

distribution of CDM projects and the few benefits for the developing world. Does the CDM only

work for some countries? The Philippines for example has tremendous potentials for renewable

energy (RE) projects. Yet, only a few CDM projects exist. Why is this the case and why do

especially countries in transition like India or China mostly benefit from the CDM?

2. According to its regulations the CDM should not only help to reduce greenhouse gas emissions,

but also promote sustainable development (SD). At the same time every project must be

additional in the sense that it would not have been possible without the CDM. If a country

decides to implement strong climate-friendly legislation, CDM project developers could fail to

prove additionality and might not receive CDM revenues. How can a mechanism that prevents

environmentally progressive policy promote SD? Furthermore, how might the political

environment in a developing country influence the CDM performance and SD benefits?

This paper will take these puzzles as a starting point to discuss the effectiveness of the CDM in

developing countries and evaluate the role of national and sub-national political conditions for a

2 UNDP 2007 (b): p. 5. 3 Nations are divided into “developed” or “industrialized” and “developing” countries according to economic and socio-demographic characteristics. See UNDP 2007: pp. 428ff. It represents a common classification that will be used in this work. However, it represents no judgement on the necessity or validity of any kind of development. See Andersen, U. 2000: p. 79.


2 Otto Suhr Institute for Political Science | Free University Berlin | © 2010

successful implementation. It will compare theoretical considerations about the effectiveness of

international regimes with empirical data from RE projects in the Philippines and to a less extend

from India and China. This paper will investigate not only the impact of the CDM on the political

environment in a developing country, but also how domestic RE politics, policy and polity influence

the implementation of the CDM. The following chapter will outline the research design.

1.2 Research Design and Relevance

This thesis is going to investigate the interactions between domestic politics and the international

climate regime based on experience from CDM projects supporting renewables in the Philippines

compared to India and China. The following research question will guide us through this thesis:

How far can renewable energy projects under the Clean Development Mechanism and domestic

political conditions in the Philippines influence each other to promote the effectiveness of the

global CDM regime compared to experiences from India and China?

Effectiveness of the CDM will be the variable to be explained. But how should we define the

complex term in this context? Three dimensions will be examined here: Effectiveness will be about

the potential of the CDM to (1) overcome barriers for RE, (2) support sustainable development in

the host country and (3) lead to political change in terms of policy, polity, and politics. Learning

from David Victor, Oran R. Young, Arild Underdal and Adil Najam a holistic, three-dimensional

definition of effectiveness going beyond pure compliance is the phenomenon to be explained.

Variables that influence effectiveness can be diverse and extraordinary complex: Economic, social,

technical and political ones have to be considered. However, this thesis cannot investigate all of

them and will concentrate on the political framework within the host countries. Concrete domestic

political conditions that are supposed to have an impact on the effectiveness of the CDM can be

found on the national and sub-national level: Factors shaping effectiveness (independent variables)

that will be examined in this thesis are the host country’s energy market, the national CDM

infrastructure, national legislation to promote RE sources, as well as conditions on the sub-national

level such as local political authorities, corruption, awareness for RE projects and experience.

These explaining variables will be examined and discussed in this work. To facilitate the structure

and methodology, the broad research question from the start should be divided into two sub-

questions to formulate hypotheses that will be tested in this work.

1. Can the CDM be described as an effective global regime in the field of renewable energy

with effects going beyond concrete projects on the ground?

Hypothesis: The CDM can be more than a pure market mechanism with the potential to

overcome not only financial barriers, but also to support sustainable development beyond the

actual project activity and it can change the political environment of the host country.

2. How do national and sub-national politics, policy and polity interact with the global CDM

regime and do they matter to promote the effectiveness of the CDM?

Hypothesis: The political environment of the host country matters and represents a deciding

factor for successful project implementation and the effectiveness of the CDM regime. National



CDM authorities have a strong impact on the project activities to fulfil SD criteria and local

political conditions are vital for the implementation process.

The international, national and sub-national political levels are all somehow interrelated. The

question is how they influence each other in a way to promote the effectiveness of the CDM regime.

To investigate the interplay between these three dimensions, this work will develop and apply a

multi-dimensional approach as the guiding theoretical background. Regime theory is seen as a useful

starting point but will be enhanced with incentives from various approaches. The following figure

summarizes the interrelationship between the dependent variable and the explaining factors:

As effectiveness includes three different indicators, there are various ways to measure this complex

phenomenon. This thesis will do this in three steps: 1. Barriers for RE sources will be defined and

the potential of the CDM to overcome these barriers evaluated. 2. Every project needs to describe

how it promotes SD in a project design document (PDD). These commitments will be discussed

together with experience from concrete case studies. 3. Political change will be most difficult to

measure, because we cannot expect clear causal relationships between the CDM regime and the

political environment in the host country. However, we will evaluate if experiences from CDM

projects shapes political authorities, raises awareness or influences policies.

The scientific relevance of this paper lies in the approach to investigate the interplay between the

global CDM regime with domestic politics, policy and polity in a developing country like the

Philippines. There is currently a lot of scholarly discussion dealing with RE projects under the CDM

and barriers in host countries. This thesis will go further and link empirical experience from RE

projects in the Philippines to the political science theoretical debate about how international

regimes and domestic politics interact. A comparison with India and China should test first results.

1.3 Definitions, Structure and Methodology

Three central terms that derive from the research question should be defined briefly in advance:

domestic politics, global regime and (as a part of effectiveness) sustainable development (SD).

There is no clear definition for “Sustainability” or “Sustainable Development” in the literature.

The term will be used in this paper in its broad sense as “[…] development that meets the needs of

the present generation without compromising the ability of future generations to meet their own

> Figure 1.1: Dependent Variable and Explaining Factors


? Domestic

Politics

Effective CDM

Regime

CDM Host Country Global Regime

social factors

economical factors

technical factors

influence on effective implementation of CDM projects

overcome barriers for renewables / promote sustainable development /

change policy, politics and polity



needs”4. SD in this respect means positive ecological, social and economical impacts from the

project itself, but also beyond this with further political incentives. The CDM represents the

“global regime” in this paper, where nations cooperate and communicate in the specific issue area

of climate change to implement projects with benefits for industrialized nations, developing

countries and the world climate. “Regimes are deliberately constructed, partial international orders

[...], which are intended to remove specific issue areas of international politics from the sphere of

self-help behaviour. By creating shared expectations about appropriate behaviour [...] regimes help

states (and other actors) to cooperate.”5 “Domestic Politics” in this work does not only include

actors and procedures (politics), but also the content of political decisions (policy) and the

institutional dimension (polity) on the national and sub-national level.

The following thesis will be divided into five further chapters: Chapter two will provide background

information on the role of developing countries in international climate negotiations. It will also

develop a general analytical framework on the barriers for RE projects and the actors involved. The

chapter ends with important information about the CDM. The third chapter will then present the

theoretical background. Regime theory and further explanations for interactions between domestic

politics and international regimes and how they influence each other will be discussed. Chapter

four provides empirical data from the Philippines. It will analyse the political framework conditions

for RE and the CDM and investigate several RE projects and four detailed case studies. The fifth

chapter represents the comparative part of this work. In a final conclusion findings from the

Philippines will be compared to data from India and China for a broader perspective.

This research has both a deductive and an inductive part with hypotheses generated from regime

theory and the CDM, but also with results extracted from experiences on the ground. The sources of

this work are diverse: Theoretical literature has been reviewed; UNFCCC documents, country

profiles and project design documents (PDDs) were considered. Interviews with CDM developers in

the Philippines and other experts have been conducted. Empirical data comes from 25 RE CDM

projects that were registered in the Philippines at the time of writing. Each project’s PDD has been

examined. Four projects were investigated in depth. For experience from India and China, 50 RE

projects from each country have been selected according to their size, location and RE source. Yet,

these projects remain only a sample. Generalizations need to be specific and carefully formulated.

Finally, several reasons legitimate the following research and the selection of the case studies.

Compared to other developing countries there are quite a lot of CDM projects implemented in the

Philippines. At the same time these projects do by far not reflect the country’s overall RE potential.

Research examining the meaning of the political framework conditions for CDM implementation is

still missing. In contrast to that, a huge amount of research has been done in India and China – two

countries that are known for their high CDM activity. It will be interesting to compare political

structures and barriers to RE projects as well as the situation of the CDM in the Philippines with

these two countries in transition to evaluate the overall effectiveness of the CDM.

4 More than 5,000 definitions of SD can be found in the literature, each defining the same term and using a different approach. This citation represents the broad and widely accepted Brundtland Commission’s definition from 1987. See World Commission on Environment and Development 1987: p.43. 5 Hasenclever, A. et al. 2000: p. 3.



2 Background: Developing Countries and Climate Change

“Climate change represents a “tragedy of the commons” on a global scale. The nations of the world [...] over-exploit the planet’s atmosphere because they gain all the material advantages from the activities that contribute to global warming, but suffer only a fraction of the environmental costs. In turn, nations and individuals typically are unwilling to reduce their greenhouse gas emissions unilaterally [...].”6

It was in 1968 when Garrett Hardin critically recognized property structures in the management of

global resources in his “Tragedy of the Commons.”7 The atmosphere in this respect is a collective

good, everyone has access to. But even the atmosphere as a resource is exhaustible and open access

needs to be controlled. When nations all over the world agreed to the Kyoto Protocol, they

accepted that climate change is a threat to humankind and the environment and that global climate

protection needs cooperation. A regime was initiated that defines the atmosphere as a public good

and establishes rules for mutual restrictions with “quotas” for greenhouse gas (GHG) emissions. It

took a long time for the world to realize the problem of climate change. In 1991 the

Intergovernmental Panel on Climate Change (IPCC) put the topic on the international agenda.8 Their

report developed scenarios with an estimated global temperature increase of between 1.5°C and

4.5°C until 2100 if countries fail to agree to any emission reduction targets. Although the scientific

debate in the field of climate change is controversial and characterized by profound uncertainties

with regard to future scenarios or predictions on necessary steps to be taken to avoid dangerous

effects of climate change, the IPCC findings should be used as a fundamental basis of this paper.

“There will always be uncertainty in understanding a system as complex as the world’s climate. However, there is now strong evidence that significant global warming is occurring. […] The scientific understanding of climate change is now sufficiently clear to justify nations taking prompt action."9

The IPCC’s call for an international treaty on global climate protection finally resulted in the

establishment of the United Nations Framework Convention on Climate Change (UNFCCC) as a non-

binding agreement.10 The United Nations Conference on Environment and Development (UNCED)

marked a turning point in the international climate discussion. During this conference in 1992 in Rio

de Janeiro the UNFCCC was drawn up and the Conference of the Parties (COP) was established as

the supreme body of the convention.11 Since then countries regularly come together under the

UNFCCC to discuss the issue of climate change, to negotiate and implement actions to tackle this

global problem. Technology transfer always played an important role to integrate developing

6 Harrison / Sundstrom 2007: p. 1. 7 Hardin, Garrett 1968: The Tragedy of the Commons. Science 162: pp.1243-1248. 8 The issue of climate change was first brought to the international scientific community by meteorologists during the First World Climate Conference of the World Meteorological Organization (WMO) in 1979 followed by several intergovernmental conferences on climate change. Together with the United Nations Development Program (UNDP) the WMO then established the IPCC in 1988, that provides scientific information since then. 9 Joint science academies' statement 2005: Global response to climate change (Academia Brasiliera de Ciencias-Brazil, Royal Society of Canada, Chinese Academy of Sciences, Academie des Sciences-France, Deutsche Akademie der Naturforscher-Germany, Indian National Science Academy, Accademia dei Lincei-Italy, Science Council of Japan, Russian Academiy of Sciences, Royal Society United Kingdom, National Academy of Sciences-USA) http://nationalacademies.org/onpi/06072005.pdf [retrieved: 12.2.2010] 10 In 1990 the UN General Assembly established a single Intergovernmental Negotiating Committee (INC) to prepare an effective framework convention on climate change. In May 1992, the Fifth Session of the INC concluded negotiations on a framework convention that was signed at the UNCED in Rio in June 1992 and entered into force on March 21, 1994. (See Gómez-Echeverri, L. 2000: p. 50. For further reading: Miller / Edwards (editors) 2001 / Rayner, S.; Malone, E. (editors) 1998. Human Choice and climate change. Volume 4. What we have learned. Columbus: Batelle Press. 11 For all COP meetings see: unfccc.int/meetings/archive/items/2749.php [retrieved: 12.2.2010]

http://nationalacademies.org/onpi/06072005.pdf

http://unfccc.int/meetings/archive/items/2749.php



countries into international negotiations on climate change. Annex 2 of this paper provides a brief

overview on this topic.

2.1 Developing Countries and International Climate Negotiations

Quickly after its establishment the UNFCCC turned out to be insufficient to achieve “stabilization of

greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous

anthropogenic interference with the climate system.”12 This led to a call for more substantial

progress at the first COP in 1995 in Berlin. Parties agreed to the Berlin Mandate13, a declaration to

strengthen the UNFCCC “by establishing specific and binding targets.”14 Developing countries

succeeded to set quantifiable reduction objectives within specified timeframes for developed

countries, but the UNFCCC did not introduce concrete policy instruments to mitigate GHG

emissions. The UNFCCC divided countries into two groups: Annex I Parties, the industrialized

countries who have historically contributed the most to climate change; and non-Annex I Parties,

which primarily includes the developing world. The principles of equity and “common but

differentiated responsibilities” require Annex I Parties to take the lead in reducing their GHG

emissions. During COP 3 in Kyoto, political negotiations culminated in the Kyoto-Protocol. Annex I

Parties agreed to specific and binding emission reduction targets for the first commitment period

between 2008 and 2012 and agreed on a jointly reduction of 5.2 percent of their GHG15 emissions

compared to the base year of 1990.16 After more than four years of debate, the Parties agreed at

COP 7 in Marrakech, Morocco, to “a comprehensive rulebook – the Marrakech Accords - on how to

implement the Kyoto Protocol”17. The Kyoto Protocol finally entered into force on 16 February 2005

after a long and difficult ratification process.18 Although the flexible mechanisms – the Clean

Development Mechanism, Joint Implementation (JI) and Emissions Trading - entered into force

before the Kyoto Protocol had been ratified by the number of Parties necessary19 its further

development after 2012 remains unclear as long as there is no binding post-Kyoto agreement.

Negotiations under the UNFCCC were often characterized by conflicts between developed and

developing countries. However, researchers describe the participation of developing countries in

climate negotiations as “spirited and constructive”20 leading to the agreement. Under the Kyoto

Protocol, industrialized countries can achieve their emission reduction targets with the help of

flexible mechanisms. This paper will focus on the CDM that allows both governments and private

firms to reduce GHG emissions in the developing world.

12 See Annex 3 for Article 2 and other references to the Kyoto Protocol in this paper. 13 UNFCCC 1995: FCCC/CP/1995/7/Add.1 (unfccc.int/resource/docs/cop1/07a01.pdf) [retrieved: 12.2.2010] 14 Müller-Pelzer, F. 2004, p.8. 15 Emission reduction targets refer to the six „Kyoto gases“ defined under the Kyoto Protocol (Annex A): carbon dioxide (CO2), methane (CH4), nitrous oxide (N20), hydroflourcarbons (HFCs), perflourcarbons (PFCs), sulphur hexafluoride (SF6). 16 With the Kyoto Protocol a set of obligations was created, with legally binding emission reduction targets for 38 industrialized countries and 11 countries in Central and Eastern Europe. 17 Institute for Global Environmental Strategies (IGES) 2006: p. 3. 18 The Kyoto Protocol needed to be ratified by at least 55 countries covering at least 55 percent of the emission reduction targets. See Article 25 of the Kyoto Protocol in Annex 3 of this paper. 19 See also Müller-Pelzer, F. 2004, p.11. 20 Gómez-Echeverri, L. 2000: p. 50. For the meaning of a developing countries’ perspective on climate change see also: Giambelluca / Henderson-Sellers 1996.

http://unfccc.int/resource/docs/cop1/07a01.pdf



Marian Miller’s analysis of developing countries’ roles, strategies and challenges in international

environmental negotiations21 was followed by a variety of literature about the integration of

developing countries in these negotiations. Most analysts conclude that developing countries do

matter and cannot be marginalized. Marc Williams showed the relevance of the “Third World”22 with

the existence of a distinct, but complex agenda of developing countries. These countries are

“constituted through the identification of common interests, the articulation of common norms, and

the institutionalization of global negotiation processes.”23 Williams concludes that the North-South

division remains “materially, institutionally and ideationally significant in the formation and

evolution of global environmental regimes.”

Developing countries are not a homogenous group in international environmental negotiations.

However, they formulate a common demand for SD in terms of additional funding, longer time

frames for implementation, technology transfer and capacity building. SD is considered to be a

powerful norm in environmental negotiations, but it does not determine outcomes. As international

negotiations proceed it becomes clear that not only industrialized, but also developing countries

need to accept legally binding GHG emissions reduction commitments to avoid dangerous climate

change: According to the 4th IPCC Assessment Report, stabilizing GHG concentrations at 450ppm will

require domestic cuts of 25 to 40 percent of GHG emissions in industrialized countries and

“substantial deviation” from business-as-usual development in the developing world.24

Consequently, to meet the ultimate objective of the UNFCCC ambitious emissions reduction targets

by developed countries, but also increased mitigation efforts by developing countries are needed.

“But the questions of fairness, and how they are addressed within the framework of the evolving climate change regime, will determine the stage at which developing countries will join the industrialized countries.”25

Climate change is closely related to human development and therefore a crucial issue both for

developed and developing countries. The 2007/2008 Human Development Report comes to the

conclusion, that “[c]limate change will be one of the defining forces shaping prospects for human

development during the 21st Century.”26 At the Rio Earth Summit in 1992 all parties confirmed that

climate change is one of the most serious environmental and economic problems confronting human

kind. They agreed to cooperate with each other and they accepted the term of “common but

differentiated responsibilities”. The question of equity has been fundamental since negotiations

started under the UNFCCC27 and remains influential till today. The discussion has its core in the so

called North-South debate between industrialized countries with long emissions histories and

developing countries which never had any large emissions in the past. Today developing countries

are concerned that they are and will be most affected by the impacts of climate change.28

21 Miller, Marian A. L. 1992 and 1995. 22 Williams adopted this term from Miller, Marian 1992. 23 Both citations from: Williams, M. 2005: p. 66. 24 See Intergovernmental Panel on Climate Change (IPCC) 2007. 25 Gómez-Echeverri, L. 2000: p. 61. 26 United Nations Development Program (UNDP) 2007: p. 24. 27 Silayan, A. 2005, p.19: “The global debate on equity in climate change policy has been engaged since the UNFCCC was crafted.” 28 Jamieson, Dale: Climate Change and global environmental justice. In: Miller / Edwards 2001 (pp. 286-307).



Developing countries therefore call for strong technological support, because they will be most

vulnerable to climate change29: The UNFCCC states that particularly people in developing countries

“face shortages of water and food and greater risks to health and life as a result of climate change. [Therefore,] developing countries need international assistance to support adaptation in the context of national planning for sustainable development, more capacity building and transfer of technology and funds.”30

The energy sector is one of the main sources of anthropogenic GHG emissions. Economic growth and

industrialisation in developing countries will lead to an increase in energy consumption and

consequently end up in more extensively GHG emissions from this sector – if no mitigation efforts

will be undertaken. The implementation of climate-friendly technologies aims to reduce worldwide

GHG emissions and increase energy supply at the same time. This can only be achieved with

international cooperation and investments in the field of RE. The CDM is supposed to provide the

only broad and global framework for the investment opportunity needed.31 But before talking about

the CDM some general remarks about RE in developing countries should be made here.

2.2 Promoting Renewable Energy in Developing Countries

Since the UN Conference on New Sources of Energy in Rome, 1961, the international community has

formally considered RE. Since then the promotion of RE sources in developing countries plays an

important role in international negotiations, but without consensus on concrete cooperation.

“On the one hand, globally coordinated action is critical, so that broad principles and norms regarding renewable energy can be agreed upon. [...] On the other hand, significant action also needs to occur at the subglobal level (however defined). Communities need to think about what kinds of renewable resources are appropriate for them [...].”32

This chapter will identify central actors and specific barriers to renewable energy technologies to

develop an analytical framework that will guide us through the case studies.

“Renewable energy has a key role to play not only in addressing emissions targets, nationally and globally, but also in accessing local energy sources which can help facilitate sustainable development and meet international development targets.”33

Solar, wind, hydro, biomass and to a less extend geothermal are generally the most widespread and

readily available RE resources in developing countries. Biomass is the major energy source

especially in poor rural areas where it still accounts for around 80 percent of household fuel

consumption.34 According to the IPCC, national governments play an important role to change this

situation by strengthening research and development, adopting climate-sound energy friendly

policies and giving incentives to promote RE projects.35 Since the IPCC report in 2000, research,

development, and deployment of RE has significantly increased.36 However, the IEA World Energy

29 And the UNFCCC states furthermore: “By 2030 developing countries will require USD 28-67 billion in funds to enable adaptation to climate change. […] “Developing countries are the most vulnerable to climate change impacts because they have fewer resources to adapt: socially, technologically and financially.” (UNFCCC 2008 (a): p. 5) 30 UNFCCC 2008 (a): p. 6. For specific adaptation technologies see UNFCCC 2006 (a). 31 See Satoguina, H. 2007. 32 Rowlands, Ian H. 2005: pp. 90-91. See also for a history of international negotiations and commitments in the field of RE. 33 Wilkins, G. 2002: p. 1. 34 See Wilkins, G. 2002: p. 18. Wilkins also claims a direct link between biomass and poverty. 35 Intergovernmental Panel on Climate Change (IPCC) 2000 (hapter 10 on energy supply). 36 See International Energy Agency (IEA) 2003 and 2008.



Outlook 200837 projects only a moderate increase of its share in global primary energy demand from

seven percent in 2006 to ten percent in 2030, as global energy demand grows further. Its share of

total electricity output is projected to increase from 18 percent in 2006 to 23 in 2030. In total

numbers however, a more significant increase can be seen and the IEA projects an overall

cumulative investment of 5.5 trillion USD in RE supply between 2007 and 2030. The Energy Outlook

also shows an overall decrease in generation and investment cost for RE technologies.38 With regard

to their commercialization, progress has been made according to a study by the Energy Research

Centre of the Netherlands in 2008.39 Although they cannot be presented here in detail, a wide range

of RE sources is already available40 and their potentials in developing countries remain large:

“[Today RE provide] electricity, heat, motive power and water pumping for tens of millions of people in rural areas of developing countries […]. Developing countries as a group have more than 40 percent of existing renewable power capacity, more than 70 percent of existing solar hot water capacity, and 45 percent of biofuels production.”41

Not surprisingly developing countries start implementing RE policies. Among 64 countries with

national RE targets are 22 developing countries, including China, India and the Philippines:

> Figure 2.1: National Policy to Promote Renewable Energy

Germany Sweden China India Philippines

Feed-in tariff x x

Renewable portfolio standard x

Capital subsidies, grants, or rebates x x x x x

Investment or other tax credits x x x x x

Sales, energy or excise tax, VAT reduction x x x x x

Tradable renewable energy certificates x

Energy production payments or tax credits x x

Net metering

Public investment, loans, or financing x x x x

Public competitive bidding x x

Source: Table based on data from REN21 2008: pp. 24f.

The World Energy Outlook 200042 projects a 70 percent growth in energy demand between 2000 and

2020 in developing countries. De-central energy supply like on the islands of the Philippines with

small scale RE projects could decrease energy transmission costs: “The niche markets for renewable

energy systems in developing countries are most likely to be located off-grid in rural areas.”43 To

what extend the CDM bears the potential to channel funds for RE dissimilation has to be examined

later on in the case studies section of this paper.

RE implementation is not only about energy supply and the improvement of energy security, it also

interacts with social issues, such as lifestyle, poverty alleviation, education, equality and SD.44 Not

37 For a more in depth look at the world’s energy demand see IEA 2008. 38 IEA 2008: p. 162ff. 39 Lako, P. 2008. 40 See Annex B and C in the study by Lako, P. 2008 for an overview on currently available renewable energy technologies and others that are subject to research and development. 41 Renewable Energy Policy Network for the 21st century (REN 21) 2008: p.6. 42 International Energy Agency (IEA) 2000. 43 Wilkins, G. 2000: p. 16. Wilkins identifies various local benefits such as a reduction of indoor air pollution, less deforestation and acid rain, and an increased urban air quality. 44 See Wilkins, G. 2000: pp. 25-35 for this paragraph.



to forget their potential to reduce environmental impacts – both on the local and the global level.

Yet, the installation and maintenance of RE systems does not only need investment funds, but also

local skills, training, infrastructure and public awareness.

Who are the actors involved in the promotion of RE and we have to concentrate on? Technology

transfer in general and the promotion of RE in specific depends on existing political framework

conditions with numerous players involved. The following central actors were mainly identified on

the basis of Wilkins 2002. Their identification should give a clear analytical framework for the case

studies of the Philippines, India and the People’s Republic of China. According to Wilkins a broad

spectrum of actors is involved – from the central government to NGOs, educational institutions and

even families. The process of RE technology transfer is in general initiated by one of the following

groups: government, international finance institutions, private sector, civil society or

epistemic communities. Their aims and goals vary greatly: Whereas governments mostly act

according to political and social aims and values, the private sector has economic interests.

International finance institutions and development agencies focus on economical and social

benefits, whereas non-state-actors put their efforts on the fulfilment of local needs.

„The most effective way in which to transfer a technology will depend on the local governance structure, the political and legislative context, the actors involved and the degree of success of the technology in similar applications elsewhere.“45

The importance and interaction of these various factors will be different from case to case,

depending on the organisation and institutionalisation of technology transfer, the natural

environment and local energy needs: RE projects are “site-specific, being influenced by the local

resources available and the energy services required.“46 The following actors are mainly involved:

National Governments in industrialised countries as well as in the developing country

where RE sources should be promoted have a crucial impact on the process of technology

transfer. The national government of the developing country can formulate RE friendly laws

and give incentives for climate-sound energy sources, it can raise awareness for RE in the

country, promote the cooperation with local actors and develop a positive institutional

framework for investors.

International financial institutions (bi- and multilateral agencies) primarily seek to

develop investment opportunities for RE. For this reason they promote a flow of information

among parties, support capacity building and develop necessary infrastructure.

Businesses and the private sector: Mostly inhabit patents and rights for technologies to be

implemented as well as financial capital. Consequently they have a crucial impact on the

project planning, coordination and implementation.

The Civil society can either put pressure on national and local government authorities, or

promote their activities. Together with epistemic communities they play a vital role to

broaden information and can support RE projects locally or on a broader scale.

Consequently, national and international, private and non-state actors can promote the diffusion

and implementation of RE in developing countries. They can all help to overcome specific barriers.

45 Wilkins, G. 2002: p. 57. 46 Wilkins, G. 2002: p. 60.



But what actually are the barriers for transferring RE technologies? We will now create an analytic

framework including barriers for RE sources for the case studies to come.

Despite positive impacts for humans and the environment the diffusion and transfer of climate-

friendly technologies from developed to developing countries the process is a challenging one.

“Widespread use of renewable energy technologies (RET) is vital in securing a sustainable global energy system. […] A range of barriers – financial, economic, institutional, political and technical – impede implementation.”47

The main barriers from the developing countries’ perspective are monopolistic energy markets,

subsidies for fossil fuel, a lack of awareness for the positive effects of RE as well as technical,

financial and institutional capacities. Barriers to the promotion and implementation of RE sources

exist on the local, national and international level. They can be financial / economical, political /

institutional, or technical. The specific barriers are often interlinked with each other.

Consequently, it is hard to define the concrete impact of any single factor. „It is important to

understand which barriers may pose a significant threat to a success of a project if ignored and

which are easily dealt with.”48 Focusing on an isolated factor would not accumulate satisfying

results. Yet, it is hard to determine clear causal relations with regard to each factor.

For RE project participants a typical barrier in developing countries is a higher risk for investments

because of political instabilities and corruption, weak administrative capacities at the government

to promote and regulate RE sources, minor experience in management as well as deficits in planning

capacities. Also cultural aspects, communication problems and a lack of understanding for the local

setting can impose barriers to RE projects in developing countries. A further problem can also be

the diffusion and adaptation of a specific technology to a new local context. Before implementing a

project its adaptation capacity has to be verified: “The right combination of energy sources and

technologies must be identified for each situation.”49 The main barriers for RE technology transfer

to developing countries can be classified into the following six categories:

1. Political / institutional aspects and legal framework: “The dissemination of renewable

energy technologies is […] often hampered by institutional and political barriers.”50 These

barriers can be uncertainties about responsibilities in the energy sector, a lack of standards,

targets and goals for RE, missing financial incentives as well as the contradictional

promotion of fossil fuels. All this can lead to economic uncertainties and higher transaction

costs that will eventually constrain the promotion of renewable energy.51 Another aspect

plays an important role for independent energy suppliers: “When it comes to electricity

generation, a key barrier is the lack of guaranteed grid access.”52

2. Intellectual Property Rights (IPR): Other constrictive aspects broadly discussed in the

literature53 are inadequate or missing laws and regulations to protect intellectual property

47 Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit (BMU) / Umweltbundesamt 2007: p. 3. 48 Wilkins, G. 2002: p. 123. 49 Wilkins, G. 2002: p. 122. 50 Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit (BMU) / Umweltbundesamt 2007: p. 9. 51 See Wilkins, G. 2002: pp. 123ff. 52 Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit (BMU) / BMU 2007: p. 10. 53 See Blakeney, M. 1989. According to Barton H. 2007, IPR plays a different role in different renewable energy sectors.



rights. “IPR laws […] define the standards for what is and what is not protectable.”54 A weak

legislative system might lead to unclear ownership as well as uncertainties when it comes to

contracts and negotiations. “Weak legal institutions in a host country can be a serious

barrier to technology transfer.”55

3. Local capacity (of infrastructure and knowledge): Developing countries often do not have

sufficiently qualified personal, the access to vital information, exchange of experience as

well as the necessary capacities on the administrative level needed for RE technologies.56

4. Economical and financial aspects: “Probably the most important issue is the economic

performance of renewable energy technologies compared to the energy sources that

presently dominate the energy markets.”57 In addition to that, a restrictive access to the

energy market, subsidies for other energy sources and insufficient investments for RE

technologies represent barriers for the deployment of RE sources.

5. Social aspects: Barriers can exist especially with regard to the acceptance of RE: “If the

local community does not accept the technology there will be no demand for its services.”58

Cultural and religious aspects must also be investigated and understood at an early stage.

6. Technical aspects: Also the technical adaptation of technologies to local circumstances has

to be considered. “Important technical barriers are the need for more research and

development for the improvement or adaptation of RET to meet [...] local conditions.”59

These various barriers for RE technologies are summarized in figure 2.2. This general framework

should be applied later on to the cases of the Philippines, India and the People’s Republic of China.

The final part of the background chapter will now investigate the Clean Development Mechanism

focusing on its rules and procedures as well as the role of RE projects under the CDM.

54 Wilkins, G. 2002: S. 127. 55 Wilkins, G. 2002: S. 128. George, A. 2006. 56 See Wilkins, G. 2002: pp. 130ff. for further information on training and education. 57 Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit (BMU) / Umweltbundesamt 2007: p. 9. 58 Wilkins, G. 2002: S. 134. This includes also gender-specific aspects. 59 Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit (BMU) / Umweltbundesamt 2007: p. 10.

Source: Illustration by the author according to the general framework by Wilkins 2002: p. 121.

> Figure 2.2: Barriers for Renewable Energy Technologies

political, institutional and legislative barriers

capacity on the ground: lack of infrastructure and knowledge

social barriers

economical barriers

technical barriers

cost efficiency

choice of location Noise exposure etc.

capital costs

regional context and local environment



2.3 The Clean Development Mechanism under the Kyoto Protocol “The Clean Development Mechanism (CDM) has been a mixed success. On the one hand it has mobilised thousands of projects and billions of investments in a very short timeframe. On the other hand it has faced serious criticism as to the strength of the incentives it actually provides, its environmental integrity and its contribution to sustainable development.”60

While most attention in the final days of COP 15 in Copenhagen was focused on the negotiations

among heads of states and the Copenhagen Accord, the UNFCCC also released a number of technical

documents, including an agreed set of changes to the CDM. These “Further Guidance Relating to the

Clean Development Mechanism”61 should lead to higher certainty and easier procedures for CDM

project developers. However, an expert from a green business research firm warns, that the failure

of Copenhagen to agree on a binding agreement substituting the Kyoto-Protocol after 2012 will have

negative impacts on the CDM as investor interests in emissions reduction are likely to decrease:

“Speeding up a few bits of paperwork won't have a huge effect, if investors don't know for certain what will happen when Kyoto expires in 2012 [...]. It will take 18 months to two years to get a project up and running, so what investor is going to invest in a new project when the whole mechanism could change a few months after the project is completed?”62

This chapter aims to introduce the CDM as a mechanism under the Kyoto Protocol. Fundamental

rules and procedures should be briefly summarized, barriers will be mentioned and the role of RE

projects discussed. Annex 3 provides extracts from the Kyoto Protocol relevant for the CDM.

2.3.1 From Theory into Practice: How the Mechanism Works

Let us first investigate the general rules and regulations of the CDM that are important to discuss

the effectiveness of the mechanism and evaluate experiences from the ground in the Philippines,

India and the People’s Republic of China. Three fundamental aspects should be mentioned here:

1) The CDM is above all characterized as a market-based mechanism. The CDM represents an

institutionalized form of cooperation between developed and developing countries as well as the

private sector. It aims to trigger “changes in the pattern of emission-intensive activities in

developing countries.”63 The CDM encourages the private sector to develop and finance projects

that reduce emissions in the developing world. This might also contribute to the transfer of

technology previously unavailable in the host countries.64 With the help of the CDM, Annex 1

countries should be able to reach their own emissions reduction targets at lower costs than

domestically. An industrialized country that invests in a developing country is “maximizing the

reduction cost-efficiency.”65 According to Article 12 of the Kyoto Protocol, the reduced emissions in

CDM projects are accountable for the developed country. The major aim is therefore – in theory – a

win-win-win-scenario – for the Annex 1 countries that have a greater flexibility to reach their

targets, the developing countries that benefit from financial flows and technology transfer as well

60 Sterk, W. 2008, p. 1. 61 UNFCCC Document 2009 [FCCC/KP/CMP/2009/16] 62 Metcalfe, D. in: CDM in China: cdm.ccchina.gov.cn/english/NewsInfo.asp?NewsId=4160 [retrieved: 12.2.2010] 63 Schneider/Holzer/Hoffmann 2008: p. 2920. 64 The Kyoto Protocol defines about 130 non-Annex 1 countries as potential CDM host countries. 65 Silayan, A. 2005, p. 7.

http://cdm.ccchina.gov.cn/english/NewsInfo.asp?NewsId=4160



as for the global climate as emissions reductions help fighting global warming no matter where they

can be achieved. „Real, measurable, and long-term benefits related to the mitigation of climate

change” (Article 12, Kyoto Protocol) were the goals for the implementation of the mechanism.66

Developing countries are not bound to any emissions reduction targets under the Kyoto protocol.

2) Issuing credits: baseline scenario and additionality. When the Kyoto Protocol entered into

force in 2005 the CDM finally moved from an early implementation phase to full operation. The CDM

however represents an extraordinary complex system with various procedures and mechanisms67

that cannot be discussed here. The concept of the CDM is based on the theory of “a transferable

emission permit system.”68 Certificates permitting GHG emissions (CERs) can be traded among

market participants to achieve cost-efficient emissions reductions by virtue market forces.69 The

CDM has its basis in the “baseline-credit system”, where “the trading entity established a baseline

level akin to a business-as-usual scenario in which no action is taken to reduce emissions.”70 If any

trading entity reduces its emissions below baseline it receives credits that can be traded in an

emissions trading scheme. Closely related to the baseline scenario and crucial for the approval of a

CDM project is the concept of additionality. According to the UNFCCC, a project is additional, “if

anthropogenic emissions of greenhouse gases by sources are reduced below those that would have

occurred in the absence of the registered CDM project activity.”71 Consequently, CDM projects need

to create measurable long-term emission reductions that are additional to the business-as-usual

scenario as shown in Annex 4 of this work. But only for a limited number of projects, additionality is

easily to define and a clear-cut case.72

3) Emissions reductions should go hand in hand with sustainable development. The emphasis of

sustainable development (SD) has been crucial for most developing countries for their support of the

CDM.73 It led to the understanding that the mechanism “would be available and beneficial not only

to a few but to all developing countries.”74 Article 12 of the Kyoto Protocol defines both

fundamental targets of the CDM: cost-effective climate change mitigation along with the promotion

of SD in non-Annex 1 countries.

Emissions reduction: Annex 1 countries have committed themselves to reducing emissions for the

period between 2008 and 2012. Yet, it is of no meaning, where these reductions are achieved.

Developing countries usually have a bigger GHG mitigation potential and their reference technology

66 See Burian, M. 2006: p. 43. 67 The modalities and procedures of the CDM were established at COP 7 in Marrakech. In order to participate in the CDM, all parties (Annex I and non-Annex I Parties) must meet three basic requirements: voluntary participation, establishment of a national CDM authority, and ratification of the Kyoto Protocol. Annex 3 of this paper provides further information. See also: UNFCCC Document 2005 [FCCC/KP/CMP/2005/8/Add.1; p.8 paragraph 5] / Müller-Pelzer 2004, p.16. 68 Silayan A. 2005. 69 See United Nations Conference on Trade and Development (UNCTAD) 2000: p. 1. 70 Silayan, A. 2005, p. 6. “Baseline” is defined by the CDM modalities and procedures as “the scenario that reasonably represents the anthropogenic emissions by sources of greenhouse gases that would occur in the absence of the proposed project activity.” (UNFCCC Document 2005 [FCCC/KP/CMP/2005/8/Add.1] pp. 6-29) 71 See also UNFCCC Document 2002 [FCCC/CP/2001/13/Add.1]. For detailed information on the tools for the demonstration and assessment of additionality: Ministry of the Environment Japan 2009. / For an introduction to the concept of additionality see Müller-Pelzer 2004, pp. 19ff. 72 In 2004, the EB also published a “Tool for the Demonstration and Assessment of Additionality”, providing guidance for additionality (http://cdm.unfccc.int/EB/Meetings/016/eb16repan1.pdf) [retrieved: 12.2.2010] 73 The concept of the CDM highlights sustainable development and evolved from the Brazilian Proposal on a Clean Development Fund. 74 Silayan, A 2005, p.10.

http://cdm.unfccc.int/EB/Meetings/016/eb16repan1.pdf



is typically more carbon intensive (carbon emissions release per unit of energy) than in

industrialized countries. CDM project activities must result in measurable reducing or absorbing of

GHG emissions that would not have occurred without the proposed project activity.

Sustainable Development75: The term of SD has various dimensions and the CDM’s contribution to it

can be achieved in different ways, such as the transfer of technology and financial resources,

sustainable ways of energy production, increasing energy efficiency and conservation, poverty

alleviation through income and employment generation or local environmental side benefits.76

Although Article 12 of the Kyoto Protocol encourages Annex 1 countries to assist non-Annex 1 Parties

“in achieving sustainable development”, there is no commonly accepted definition of that term.77

Each CDM host country may define its SD objectives “in light of its own national circumstances and

priorities […]”78 The CDM authority may also assist in developing specific SD indicators. But “it is the

host party’s prerogative to confirm whether a clean development mechanism project activity assists

in achieving sustainable development.”79 But eventually there is no joint responsibility for

determining SD benefits of a CDM project. This raised concerns among environmentalists, who are

worried about the lack of clear SD requirements that might lead to a race to the bottom concerning

sustainability issues. Compared to a country with clear SD criteria, the “country with less

sustainability criteria will more easily approve a project and attract financial capital […].”80 Burian

also draws the conclusion that “a structural dysfunction in terms of achieving minimal sustainable

development performance of CDM project activities”81 exists and host countries find themselves in a

competition for foreign investments as project developers may freely decide where to realize a

project globally. But actually is sustainable development? For assessing SD in this work a definition

modified from the Brundtland Report 1987 will be used:

“Sustainable Development can be seen as an improvement of at least one of the categories economic, social and environmental, without having negative impacts on any of the others.”82

A study by UNDP reveals significant potentials of the CDM to promote SD in terms of its contribution

to poverty reduction and the Millennium Development Goals (MDGs):83

“[The CDM] lowers the cost of compliance with the Kyoto Protocol for developed countries [and] developing countries will also benefit from increased investment inflows, particularly to advance sustainable development goals.”84

We will see if this is still the case in the Philippines, India and China.

75 Olsen, K. 2007 provides an overview on the literature about the CDM’s contribution to SD. Satoguina, H. 2007 develops SD criteria: The system should: 1) be compatible with its normal environment, 2) secure scare resources, 3) cope with challenges, 4) adapt to its environment and 5) coexist with other systems. 76 See IGES 2006: p. 5. 77 The IPCC states that “sustainable development is a context driven concept and each society may define it differently […].” (IPCC 2000: p. 3.) NGOs already designed tools to ensure SD: E.g. the Sustainable Development Appraisal Tool (South South North) or the Gold Standard (WWF) according to Satoguina, H. 2007. 78 United Nations Conference on Trade and Development (UNCTAD) 2000: p. 35. 79 UNFCCC Document 2002 [FCCC/CP/2001/13/Add.1] pp. 22ff. A member of the host country’s DNA decides if a project contributes to SD. About definitions and criteria see Burian, M. 2006: pp. 18ff. 80 Schmitz, D. 2006: p. 49. 81 Burian, M. 2006: p. 54. 82 World Commission on Environment and Development (WCED) 1987. Some authors raise attention for developed and developing countries’ different perceptions of sustainability and change the definition accordingly. (See Satoguina, H. 2007) 83 UNDP 2004: pp. 25f. IOB Evaluations 2008 evaluated 44 CDM projects and identified indirect benefits to SD from half of the projects that are not related to GHG emission reduction but were necessary due to national legislation. The study admits a high “uncertainty surrounding the achievement of the direct and indirect effects on sustainable development.” (p. 85) 84 IGES 2006: p. 6. According to Castro / Michaelowa 2008 most developed countries participate under the CDM to close their “compliance gap” and meet their targets they agreed to under the Kyoto Protocol.



All in all, the CDM works as a mechanism to reduce global GHG emissions. It reflects the overarching

principles adopted by the parties in 199285: It provides developed countries an increased flexibility

by allowing them to earn CERs through projects in developing countries, it helps including

developing countries into the climate change negotiation by linking the issue to SD and it supports

the deployment and transfer of technological and financial resources – at least in theory.

2.3.2 Barriers to CDM Projects and Global Distribution

After a slow start, the CDM market has grown enormously over the past years. Political certainty

after the implementation of the Kyoto Protocol and increasing empirical experience with CDM

procedures led to that positive trend. There has been an enormous increase in projects registration

under the CDM: In January 2005 there were 64 projects registered and about 100,000 CERs expected

by 2012. At the end of January 2009 already 4,926 projects were registered, in the process of

registration or at validation, accounting for 2,839 million expected CERs.86 However, the global

distribution of CDM projects shows “a clustering of projects towards a few larger developing

countries.”87 and the CDM fails to include a high number of least developed countries (LDC). Various

reasons prevent about two thirds of all developing countries from engaging in the CDM88 and only a

few countries that are already attractive for foreign direct investments also benefit from the CDM

(e.g. China, India or Brazil).89 The unequal global distribution is contrary to earlier assumptions:

“Intense competition between developing countries to attract CDM investments is likely, and the quality of domestic institutions, internal political stability and efforts to market CDM projects to investors will be crucial for individual countries to secure their share in the CDM market.”90

85 See Silayan, A. 2005, S. 10. 86 Data from: United Nations Environmental Program (UNEP) Risoe Centre 2010. 87 Silayan, A. 2005, p. 1. 88 See http://cdm.unfccc.int/Projects/MapApp/index.html for current project distribution. 89 IOB Evaluations 2008: p. 16: “Since CDM is a market mechanism, CDM projects tend to go to countries which normally benefit from direct foreign investment because they are financially attractive, have relatively good infrastructure and markets and a stable governance system.“ 90 Jotzo / Michaelowa 2001: p.40.

> Figure 2.3: Global Distribution of Registered CDM Projects

Source: Map of global project distribution according to the UNFCCC, (http://cdm.unfccc.int/Projects/MapApp/index.html) [retrieved: 25.01.2010]

= CDM project, Large scale, one location

= CDM project, Large scale, several locations

= CDM project, Small scale, one location

= CDM project, Small scale, several locations

http://cdm.unfccc.int/Projects/MapApp/index.html



The reasons for the unequal distribution with a lack of CDM projects in certain developing countries

may vary from case to case. The CDM literature identifies at least seven relevant barriers:

1. Official conditions for participation in the CDM market represent already serious barriers for

a number of developing countries to participate under the CDM. In early 2009, out of 151 non-

Annex 1 countries to the UNFCCC only 129 had ratified the Kyoto Protocol. 111 countries have

established a necessary Designated National Authority (DNA).91 Both criteria are preconditions

for participation. This already minimizes the number of countries being applicable to the CDM.92

2. The CDM mainly works as a market mechanism – higher emissions reduction potentials

automatically lead to a higher project activity in a country. It is obvious but worth mentioning

that a country’s CDM potential is directly related to its level of emissions. Of the top eleven

emitters among developing countries eight appear in the top 15 host countries by volume.93

“Since success in the case of the CDM framework is measured in terms of reduced emissions, the

first investment option will be countries with high reduction potential.”94 A small amount of

CO2-eqivalent emissions excludes countries from the CDM. Especially LDCs struggle to provide

baseline data that is necessary for every CDM project to prove additionally.

3. Local capacity and CDM infrastructure is missing or not strong enough. The capacity of a host

country to support and enable CDM projects is important, because “all CDM projects must gain

the written approval of the host country’s DNA [and] governments can often create enabling

environments […] to encourage CDM investment.”95 A number of developing countries are not

able to implement the structures for the CDM – particularly a well-functioning DNA96 as an

information provider, CDM coordinator, and project adviser. “The number of projects a country

is able to offer in the international market is a direct reflection of how well a country’s DNA

functions.”97 Capacity building is therefore a major focus of the UNFCCC.98 A slow host country’s

approval process represents a further barrier for CDM developers.

4. The overall investment climate in a country can be negatively affected by political and

economic instabilities. Avis and Blodgett show a correlation between international competitive

rankings and the size of a country’s CDM pipeline. They conclude that “a lack of transparency

over DNA approval processes has impeded CDM investment in many countries.”99

5. Financial barriers like insufficient access to funds, capital investment and high upfront

transaction costs as well as insufficient risk management can also exist. These barriers affect

especially “smaller projects for which the revenue stream from CERs may be considered too

small to attract international funds or outweigh the set-up costs of the project.”100 As

91 For a list of DNAs see UNFCCC: http://cdm.unfccc.int/DNA/index.html [retrieved: 12.2.2010] 92 A 2005 report comes to the conclusion that 67 percent of all developing countries have not ratified the Kyoto Protocol and/or established a DNA (according to Silayan, A. 2005: p. 23). 93 Countries ranked by volume of CO2-emissions (and CER volume in the CDM pipeline): China: 1 (1), India: 2 (2), South Korea 3 (4), Iran 4 (-), South Africa 5 (11), Saudi Arabia 6 (-), 7 (5), Brazil 8 (3), Indonesia 9 (8), Taiwan 10 (-), Thailand 11 (13). Data from Avis/Blodgett 2008: p. 73. This argument was also raised by Lambert Schneider (Interview: 5.12.2008). 94 Silayan, A. 2005: p. 24. 95 Avis, J. / Blodgett, C. 2008: p. 74. 96 Overview on the DNA of host countries: http://cdm.unfccc.int/DNA/index.html 97 Silayan, A. 2005: p. 26. 98 UNFCCC Document 2002 [FCCC/CP/2001/13/Add.1] highlights capacity building. 99 Avis, J. / Blodgett, C. 2008: p. 74.1 100 See UNFCCC Document 2008 [FCCC/KP/CMP/2008/INF.2] for further information on this barrier (p. 5).

http://cdm.unfccc.int/DNA/index.html

http://cdm.unfccc.int/DNA/index.html



transaction costs for registration and verification are basically fixed, they are higher for small

scale projects compared to larger activities with higher CER revenues. RE projects moreover

face the problem of financial unattractiveness, as they normally reduce CO2, equivalent to 1

CER, much less than for other Kyoto gases with higher global warming potentials.

6. In addition to that, structural and institutional barriers in CDM host countries exist.101 The

UNFCCC identifies four major barriers: insufficient institutional and administrative capacity

within relevant national authorities, restricting legislation and policies such as taxes and access

to the national energy grid, concerns regarding the institutional framework like corruption or a

lack of transparency as well as investment restrictions to specific regions or project categories.

Knowing this, the analysis of the case studies should concentrate on political barriers and

therefore include data about the natural potentials for renewable energy, the legal framework

and environmental performance,102 political and economic framework conditions (also values,

corruption etc.), as well as the energy sector of the country.103

7. Finally, barriers on the procedural level of the CDM under the rules of the CDM Executive

Board (EB) exist. They affect all host countries and will not be the focus of this work.104

Although the CDM is the only mechanism under the Kyoto Protocol to facilitate cooperation between

developed and developing countries and leads to substantial financial and technological flows,

criticism on perverse effects of the CDM has been raised. Environmentalists also criticize the

concentration on financial incentives for GHG emissions and assume a “race to the bottom” with

the “CDM’s emphasis on least-cost carbon credits.”105 Positive side-effects like from RE projects are

not rewarded. Recent reports even doubt the overall potential of the CDM to fight global warming.

Olsen argues, that “left to market forces, the CDM does not significantly contribute to sustainable

development.”106 For example, hydrofluorocarbons (HFCs) has a 11,700 higher global warming

potential than CO2. Its abatement however has no significant concrete SD benefits for the local

population. Only two percent of all CDM projects reduce HFCs, PFCs and N2O, but they account for

26 percent of all expected CERs until 2012.107 RE projects in this respect are financially less

attractive as they normally reduce only CO2 emissions. Consequently cost-effective GHG emission

reduction and the promotion of SD do not go hand in hand:

“The CDM has been designed to channel financial resources to low-cost projects that offer maximum emission reductions per investment. While this market logic is expected to reduce the overall costs of global climate change mitigation efforts, it also directs attention away from small-scale community based projects with additional social and environmental benefits.”108

A comparison between the number of CDM projects and CERs issued reveals that although RE CDM

projects are the most in number they do not receive most of the CERs (see Annex 4 for an

101 See UNFCCC Document 2008 [FCCC/KP/CMP/2008/INF.2] p. 6 for more information on that issue. 102 Environmental Performance Index (EPI): http://epi.yale.edu/Home [retrieved: 12.2.2010] 103 International Energy Agency (IEA) database: www.iea.org/Textbase/stats/index.asp [retrieved: 12.2.2010] 104 Avis, J. / Blodgett, C. 2008: p. 72. The EB says in its annual report that “increasing and enhancing human and institutional capacity remains one of the key constraints of the CDM system as a whole [which] constrains the ability of the system to adapt/change (be streamlined), to address caseload (delays), to increase transparency/knowledge and to enhance simplicity while preserving environmental integrity.” (UNFCCC Document 2008 [FCCC/KP/CMP/2008/4] p. 6.) 105 Ganapati / Liu 2008: p. 353. 106 Olsen, K. 2007: p. 84. 107 See Annex 5 of this paper for details. 108 Lövbrand / Rindefjäll / Nordqvist 2009: p. 94.

http://epi.yale.edu/Home

http://www.iea.org/Textbase/stats/index.asp



overview). To sum it up, the distribution of CDM projects across countries “will be determined by

the availability and cost of project options, as well as institutional factors, established investment

linkages, perception of risk and other factors.”109 The UNFCCC is already taking actions to address

most of the barriers mentioned above.110 As we are going to examine RE projects we will finally

summarize the situation of RE sources under the CDM.

2.3.3 Renewable Energy: General Barriers and Perspectives under the CDM

Energy-related emissions account for more that 80 percent of global CO2 emissions.111 Hence,

development and deployment of low carbon energy sources offer great potentials for reducing GHG

emissions. According to the IEA, 12 percent of avoided CO2 emissions by 2030 could come be

realized with RE.112 Some numbers illustrate the great potential for RE: 2.4 billion People worldwide

use traditional biomass fuels113 (wood, agriculture residues, dung for cooking and heating). Indoor

pollution is estimated to cause the death of two million people a year. 1.6 billion people do not

have access to electricity yet. At the same time the fast growing energy demand especially in

developing countries leads to annual investments of up to 300 billion USD in the energy sector.

The global potentials for renewable energy sources are huge. Around 17 percent of primary

energy supply worldwide comes from RE sources - including traditional use of biomass (9 percent)

and large-scale hydro power (5.7 percent). This share is far below the overall global potential.

“Even the potential that is accessible today using proven technologies is around six times higher

than current worldwide energy demand.“114 Most of the projected additional energy demand will be

needed in developing countries. “The question as to which energy sources they choose will

therefore heavily influence the world’s policies, environment and long-term future.” According to

the German Wuppertal Institute115 currently meagre access to energy services in many developing

countries offers “a chance to shift directly to the use of new renewable energy sources and leapfrog

the need for investment in huge fossil fuel power plants.” The Wuppertal Institutes gives several

reasons for a stronger shift towards renewables: 1) RE improves supply security as they are

inexhaustible, their natural availability is 3,000 times higher than current global annual energy

consumption and they are available in most regions of the world. 2) RE provides greater flexibility

for both small and large-scale energy service projects in urban and rural regions. 3) Renewable

energy addresses environmental concerns by reducing GHG emissions and the environmental

damage resulting from fossil fuel use. The policy paper finally comes to the conclusion that

widespread use of RE technology is “vital in securing a sustainable global energy system.”116

There are various financial, political and technical barriers for RE projects. Before we are

going to investigate the potential of the CDM to promote RE sources, this paragraph will summarize

109 Jotzo / Michaelowa 2001: p.14. 110 UNFCCC Document 2008 [FCCC/KP/CMP/2008/INF.2] pp. 12ff. 111 Miléndez-Ortiz, Ricardo; in: Barton, J. 2007: p. vii. 112 International Energy Agency (IEA) 2003 113 Data in this paragraph from: World Bank 2006. 114 Both citations: BMU / Umweltbundesamt 2007: p. 8. Data in this paragraph from: BMU / Umweltbundesamt 2007: pp. 7ff. 115 Compare Federal Environmental Agency 2007. (citation from: BMU / Umweltbundesamt 2007: p. 8.) 116 BMU / Umweltbundesamt 2007: p. 8.



general barriers for implementing RE projects. These barriers exist on the local, national and

international level. The four most significant ones should be briefly presented here:117

1) Economic performance: “Probably the most important issue is the economic performance

of renewable energy technologies compared to the energy sources that presently dominate

the energy markets.” Consequently the willingness to finance high investment costs is

relatively low despite future benefits from later low (to zero) fuel costs.

2) Political barriers: “The dissemination of renewable energy technologies is [...] hampered

by institutional and political barriers.” A lack of capacity, unclear responsibilities in the

energy sector as well as a fixation on large-scale, predominantly fossil energy technologies

in most developing countries lead to huge economic uncertainties and therefore to

Increased transaction costs and a longer planning process for project developers.118

3) Technical barriers: “Important technical barriers are the need for more research and

development for the improvement or adaptation of RET to meet national and local

conditions.” More research is needed to refine technologies according to local and national

circumstances. Finally, “when it comes to electricity generation, a key barrier is the lack of

guaranteed grid access” - especially for independent power producers in monopolistic (or

oligopolistic) national energy markets.

The question is now how the CDM can help to overcome these and other barriers for RE sources.

The CDM has the potential to lower key barriers for RE development, but mostly fails to act as

a catalyst for widespread RE technology implementation. In the Kyoto Protocol, Parties to the

UNFCCC already expressed their will to promote new and renewable energy sources in developing

countries with the help of CDM projects. Today, the CDM works for RE119 and most projects involve

electricity-generating technologies, although the general barriers mentioned above might vary quite

strongly depending on the technology and the CDM host country. Yet, RE projects play a significant

role under the CDM, as Annex 5 illustrates. However, “renewable energy projects do not get as

much out of the CDM as other project types.”120 Even though RE projects account for about 60

percent of all CDM project activities, the overall amount of CERs coming from this sector is not even

one forth of all issued CERs. This is because of the “low” global warming potential of CO2 compared

to other GHGs.121 However, RE project activities can build on approved CDM methodologies and

bundling rules and are relatively easy to assess compared to the household and transportation

sector. Still, barriers to the implementation of CDM projects exist.122 Especially the CDM EB

additionality tool can be challenging for CDM projects, as incentives from the CDM can be marginal

and other non-CDM related subsidies might be more relevant.123

117 The four citations in the following paragraph are from BMU / Umweltbundesamt 2007: pp. 9-10. For barriers to RE projects under the CDM concerning high transaction costs and low CER reveneues see also Pearson, B. 2005 and Schröder, M. 2007. 118 Especially small scale RE projects face higher relative transaction costs. See Pearson, B. 2005. 119 See for this paragraph: Oppermann, K. 2006. 120 BMU / Umweltbundesamt 2007: p. 13. 121 Nevertheless, it has to be considered, that “the CDM strongly promotes renewable energy projects (biogas for example) that avoid methane emissions. Methane has 21 times the global warming impact of CO2. Projects thus yield high volumes of CERs and this has a very strong impact on profitability.” (BMU / Umweltbundesamt 2007: p. 14) See Annex 5 of this paper. 122 Oppermann, K. 2006. 123 Oppermann, K. 2006.



“Measures to address CDM-specific barriers include priority setting at project level by host

countries, development of a suitable legal CDM framework, capacity building [and] CDM

promotion.”124 But it is not the host country’s responsibility alone to promote RE CDM project

activities. It is also up to developed countries and the private sector to provide funds and capacity.

Various actors can be responsible for different barriers and each one requires quite diverse

measures to be overcome. Annex 5 of this paper outlines the barriers for RE projects under the

CDM, as well as the measures to be taken and actors involved to overcome these barriers. The CDM

is able to lower some of the key barriers to RE development, especially with regard to financial and

economic aspects; but it cannot nullify all existing obstacles. The CDM might also – on a smaller

scale – help to overcome political barriers with regard to the cooperation between foreign investors

and institutions within the developing country, as well as energy security and the reduction of

energy dependency. The German Ministry for Environment identifies the host countries conditions as

“the decisive factor”. Adjusting those conditions would “attract more CDM activities and assist the

host country in reaping the benefits of RET.”125 Consequently this paper will focus on the political

structures and processes in the Philippines, India and China.

“Policy-makers in many CDM host countries need to make significant efforts to remove barriers to the dissemination of renewable energy technology. Only then can the CDM have stronger impact.”126

The improvement of the CDM within the existing regulatory framework could eventually open the

CDM for RE in the household and transportation sector and allow linking national incentive schemes

with the mechanism. By capturing spill-over effects and the use of standardized baselines for RE

project activities the CDM offers further potential for RE beyond 2012. Nevertheless, key barriers

remain on the national political, economic and technical level. This fact leads the Wuppertal

Institute to the conclusions that the energy market needs to be reformed: subsidies for fossil fuels

should be reduced, independent power suppliers need access to the grid, clear and ambitious

targets for RE have to be set and CDM supporting policies need to be implemented.

“Apart from removing policies that negatively impact RET, it is also essential to introduce policies that positively support them in order to push them into the market, achieve economies of scale and quickly ‘buy down’ technology costs.”127

Furthermore, a DNA with sufficient competent staff is needed in the host country to guarantee a

transparent CDM approval process. Capacity building must occur among businesses and

stakeholders, the CDM has to be integrated into national energy saving, economic development

planning and clear preferences for RE projects are a prerequisite for further development.

Alexandros Flamos128 investigated the potential of the CDM for a widespread development of

renewables in developing countries. According to him the CDM mostly fails to act as a catalyst for

widespread RE technology implementation: Although wind power projects are widely implemented,

the investment attractiveness of solar power varies significantly from one place to another and

especially small scale hydro projects face financial barriers.

124 BMU / Umweltbundesamt 2007: p. 3. 125 BMU / Umweltbundesamt 2007: p. 3. 126 BMU / Umweltbundesamt 2007: p. 16. 127 BMU / Umweltbundesamt 2007: p. 16. 128 See Flamos, Alexandros 2009.



“It has to be clarified that CDM is not considered a panacea for the achievement of sustainability, but as a ‘tool’ that may facilitate the adoption of more sustainable paths of development than those adopted by the developed countries during the previous century large scale industrialization.”129

Flamos concludes that the CDM bears the potential to promote sustainable energy strategies in the

host countries, but often fails to do so due to a lack of information in the developing countries and

the single project approval status of the mechanism. We will now turn to a more detailed analysis

about RE projects under the CDM.

There is a link between the promotion of RE and sustainable development. Several authors

connect the question of the CDM’s contribution to SD to its potential to promote RE projects130 - i.e.

to desirable outputs like a switch from fossil fuels This assumption is based on pure logical

induction, but a RE project’s good sustainability performance can not per se be guaranteed. It is

also difficult to prove, if a project would not have occurred without CDM funding (additionality). A

further barrier for relatively small scale RE projects is their competition with low cost gas capture

and destruction projects that create relatively cheap CERs.131 Burian even sees an “inverse

correlation between clearly additional and renewable energy projects.”132

“Widespread use of renewable energy technologies (RET) is vital in securing a sustainable global

energy system.”133 But even though the number of countries with significantly RET growth has

increased over the last years, dissemination of new technologies in this sector in most countries of

the world is still very limited. “A range of barriers – financial, economic, institutional, political and

technical – impede implementation.”134 As we have showed in this part, key barriers for the

promotion of RE from a developed country’s or CDM project developer’s perspective include

monopolistic or oligopolistic energy markets, counter-productive subsidies, a lack of awareness of

RET potentials and benefits, missing technical and institutional capacity and financing means. The

CDM should now help to overcome these structural barriers and provide financial incentives for

shifting to a less emissions-intensive economy. This will be evaluated in the empirical part.

The CDM is perceived to be too small in size to make a difference. According to a survey with

CDM stakeholders and project developers135 the CDM can be a positive incentive for a stakeholder’s

public relations strategy or an export opportunity for some EU countries, but it has not the potential

to make a difference in the transition towards a low-carbon future. The CDM might lead to cost

efficient CO2 emissions reductions, but stakeholders also raise concerns with regard to additionality

and criticize that projects fail to contribute to local SD.

Having set the analytical framework for RE development and having discussed the potentials of the

CDM to overcome barriers we can now proceed to the next chapter in which we will develop a

theoretical framework of this thesis.

129 Flamos, Alexandros 2009: p. 101. 130 See Burian, M. 2006: p. 58ff. For studies that certify positive development impacts see: Factor AG 2001: SCC Obstacles and Opportunities. / Afgan, Carvahlo 2002: Multi Criteria Assessment of New and Renewable Energy Power Plants. 131 See for both issues Burian, M. 2006: p. 62ff. 132 Burian, M. 2006: p. 96. / See also: Sutter, Christoph 2003: Sustainability Check-up for CDM – How to assess the sustainability of international projects under the Kyoto Protocol. Wissenschaftlicher Verlag, Berlin. 133 BMU / Umweltbundesamt 2007: p. 3. 134 BMU / Umweltbundesamt 2007: p. 3. 135 Benecke et al. 2006 conducted interviews with 36 stakeholders within the CDM market.



3 Theory: International Regimes and Domestic Politics

“To the extend that an analysis of international regimes ignores domestic political processes, it will not be able to show the way in which regimes actually influence policy changes at the operational level. Thereby it closes off one important avenue for examining questions of regime effectiveness.”136

The variety of classical theories of international relations contributing to the issue of global climate

change is profound, vast and confusing at the same time. No matter if realism, neorealism,

historical materialism, neoliberal institutionalism or cognitive approaches – they all offer

explanations for the development and outcomes of international climate negotiations. At the same

time, every approach also contains particular anomalies.137

Unfortunately, there is not the one and only theory that will guide us through this paper. But we

take this unsatisfactory puzzle as a starting point to generate hypotheses from various approaches.

We will discuss that regime theory is by far not sufficient to handle complex interrelations between

an international regime and the domestic sphere and we will develop a three dimensional analytical

framework, taking the local, national and international level into account and integrating the local

dimension into the global sphere. This work will focus on linkages between local and global politics

in international environmental commitments. Does the local level matter? Or is it just a mismatch?

Most research of international environmental regimes focus on political and institutional aspects of

the nation-state and on interrelations between the international and the national level. This paper

will use these ideas as a basis and enhance the model of interaction with the local level.

3.1 Theoretical Background: Effectiveness of an Environmental Regime

This chapter will discuss the theoretical background. We will first have a brief look at the

complexity of “politics”, then define the CDM as an international regime and finally discuss the

effectiveness of implementation before we investigate interactions between international regimes

and domestic politics. This will provide a theoretical framework for the empirical data to come.

3.1.1 Polity, Politics and Policy: The Complexity of Political Dimensions

In German, French and other languages there is only one noun corresponding to the adjective

“political”, while the English language has three. When we talk about “domestic politics” this paper

will consider all these three political dimensions: policy (political content), polity (political form),

and politics (political processes).138 This chapter will briefly introduce these categories and visualize

the complexity of “policy” as a multidimensional phenomenon before looking at the relationships

between domestic politics and international regimes. The terms of policy, politics and polity make

it possible to investigate and define the explicit impact of the CDM in a more specific way. At the

same time all three dimensions are interlinked and cannot be considered isolated from each other.

136 Underdal, A. 1998: p. 168. 137 For an overview on theoretical contributions see Ian H. Rowlands in: Luterbacher / Sprinz 2001: pp. 41-65. 138 Information in this chapter based on Rohe, K. 1994.



The policy dimension refers to the content of political decisions. This includes political programs

from any actor or interest group as well as outcomes from political decision-making processes, such

as constitutions and judicial decisions, legislative acts and regulations. Public policy is the course of

action or inaction taken by governments - relevant with regard to the CDM and the promotion of RE.

Policy can also be defined as “a system of laws, regulatory measures, courses of action, and funding

priorities concerning a given topic promulgated by a governmental entity or its representatives.”139

Politics describes the process by which groups of people interact with each other and come to

decisions. It refers to the ways and methods of formulating and implementing policy. It can be

observed not only in a political context, but also in academic and religious institutions,

corporations, and all kinds of situations where human groups interact. Politics includes conflicts and

negotiations, political debates and the search for a compromise between interest groups. It also

deals with the power of actors and their authority to enforce their interests (against opposition).

The polity dimension finally sets the frame in which policy and politics occur. Polity describes

structural issues such as institutional aspects or the legal system. Not only the constitution of a

country, but also the political culture, patterns of behaviour and orientation belong to polity.

As this paper will investigate the impact of the CDM, decision-making processes play a vital role.

The policy cycle140 provides a useful tool for analysing the policy dimension with regard to the

development of certain items in the field of RE politics and it will be clearer where the CDM has

potentials not only to overcome barriers, but also to influence the decision-making process.

139 Kilpatrick, D. "Definitions of Public Policy and Law" (musc.edu/vawprevention/policy/definition) [retrieved: 12.2.2010] 140 Jann / Wegrich 2003: p. 82.

?

> Figure 3.2: Areas for the CDM to Influence Political Decisions

problem identifi-cation

agenda setting

policy formulation

adoption

implemen-tation

evaluation

Clean Development

Mechanism

Source: Illustration by the author adopted from Jann / Wegrich 2003: p. 82.

> Figure 3.1: Forms and Characteristics of Political Dimensions

Source: Illustration by the author adopted from Böhret, Carl/Jann, Werner/Kronenwett, Eva 1988.

Policy content of political debates / laws and

regulations

- problem solving - task fulfilment - political organization

Polity form and structure /

institutional aspects / legal system

- procedures - political structure - organizations

Politics decision-making

processes / patters of interest groups’ interaction

- cooperation and conflicts - power - enforcement

http://www.musc.edu/vawprevention/policy/definition



This standardized policy cycle shows various levels of impacts when it comes to implementation. It

also recognizes that experiences are made and adopted, so change might occur over time:

“In many instances the implementation process appears never-ending. Commitments are adopted; efforts are made to implement them; the commitments are adjusted. Problems are adjusted rather than eliminated – implementation is part of a perpetual cycle of policy that is driven by new information, experience and political pressure.”141

Knowing the multidimensionality and complexity of politics, policy and polity, we will now turn to

the “effectiveness” of international environmental commitments.

3.1.2 Effective Implementation of International Environmental Commitments

Even the most ambitious and wide-ranging non-binding international agreement has no meaning if it

has no impact on the national level because it has no legally binding effect and cannot be

implemented effectively. But what makes an agreement successful? At what stage can we say that

an international commitment has been implemented and translated into measurable and verifiable

national action effectively? Before conceptualizing a theoretical framework about the interrelations

between the international, national and local political arena we first have to define “effective

implementation” and develop variables in the context of the CDM to be tested later on. This will lay

the basis for the conclusion to identify the effectiveness of the CDM. 142

The process of implementation has a huge impact on the effectiveness of regimes. The

implementation of international commitments and multilateral environmental agreements is widely

discussed in political science literature since negotiations and environmental agreements have

increased over the last decades. UNDP lists 271 international treaties and other agreements in the

field of the environment from 1921 until 2005.143 These agreements “play an increasingly important

role in promoting the integration of environment and development, and in providing an effective

legal and regulatory framework to underpin the efforts of the international community [...].”144

However, most analysts concentrate on the content and the negotiations of these treaties, and until

now there is no standard definition for implementation.

According to Adil Najam145 the term is both a noun, meaning the state of having achieved the goals

of the policy; and a verb, describing the process, trying to achieve that policy objective. Merilee

Grindle investigated implementation in developing countries and defines the term as

“an ongoing process of decision making by a variety of actors, the ultimate outcome of which is determined by the content of the program being pursued and by the interaction of the decision makers within a given politico-administrative context.”146

According to Najam, implementation is not simply an administrative problem, but a dynamic

political process influenced by multiple actors from various levels, within and between different

141 Victor et al. 1998: p. 6. 142 Implementation with regard to domestic policy and in the context of this paper should be understoond according to the common-sense definition as “those events and activities that occur after the issuing of authoritative public policy directives, which include the effort to administer and the substantive impacts on people and events.” (Mazmanian, D.A. / Sabatier, P. 1983: Implementation and Public Policy. Scott, Foresman & Co, Chicago, p. 5.) 143 United Nations Development Program (UNDP) 2005. 144 Adnan Z. Amin, Director UNEP New York, 17 April 2000 (www.nyo.unep.org/pdfs/cv01chsp.pdf) [retrieved: 12.2.2010] 145 See a review of literature on domestic implementation by Najam, A. 1995 for this paragraph. 146 Grindle, Marilee 1980, citation from: Najam, A. 1995: p. 7.

http://www.nyo.unep.org/pdfs/cv01chsp.pdf



organizations. All levels affect the process of implementation.147 Najam finally synthesises a set of

five interlinked critical variables that can explain success or failure of implementation and

furthermore effectiveness of international environmental commitments: the content (what is the

problem and how to solve it), the institutional context (the procedures and actors involved in the

implementation process), commitment of these institutions to the goals and methods of the policy,

the administrative capacity of implementers, and the support of clients and coalitions whose

interests are affected by implementation ( Najan calls this a “5C protocol”). Each variable is linked

to and influenced by one another and its importance depends on the specific implementation

situation. Consequently all variables have an impact on the effectiveness of an international

regime. We need to identify the most important ones depending on the specific case.

Effectiveness is a multidimensional concept, hard to define.148 According to Oran Young, regimes

can affect various domains (inside and outside the issue area in which they are embedded), they

can have internal and external effects (meaning that effects directly related to a regime can lead to

chain-reactions and spill-over effects) as well as direct and indirect impacts (help to solve an

environmental problem or make it worse).149 Measuring effectiveness is complicated in each of

these areas. Jørgen Wettestad focused his research about effectiveness on institutional factors.150

He concluded from four case studies, that regimes tend to be more effective when they are

regional, not global, guarantee inclusive access for various actors, have a strong and active

secretariat, pursue a comprehensive and flexible agenda, pay attention to scientific input and

establish well-functioning reporting and monitoring systems. Although these conditions increase the

chance for effective cooperation, Wettestad admits that effectiveness of the institutional design

always depends on the regime itself and is heavily conditioned by concrete problem characteristics.

Let us therefore now turn to effective regime implementation. According to Underdal, evaluating

effective implementation means first of all “comparing something [...] against some standard of

success or accomplishment.”151 This leads to three basic questions:

1) What precisely is the object to be evaluated? First of all we have to determine if we are

interested just in the substantive regime arrangement, or if we also investigate additional costs that

come from producing and maintaining it. This paper will (only) deal with the arrangement itself –

meaning the CDM – and its consequences. But what might these consequences look like? Success of

the regime might focus on concrete benefits, or involve a broader definition of achievement. This

thesis will not only include the net benefits of the CDM projects, but also be a more elusive notion

of accomplishment, taking the overarching problem of climate change and political incentives to

solve it into account. A third very important distinction we have to make is between the output of a

147 For the debate between “top-down” and “bottom-up” view on implementation see Najan, A. 1995: pp. 13-14. 148 Ronald B. Mitchell investigated institutional aspects of implementation, compliance and effectiveness with regard to the global climate regime. According to Mitchell, the term effectiveness is used in various ways “ranging from something akin to compliance, to economic efficiency, to benefits exceeding costs, to achieving the sought-for environmental improvement.” He finally concludes that an effective climate regime depends on “nations, corporations, NGOs and individuals [...].” (Mitchell in: Luterbacher / Sprinz 2001: pp. 223 and 243) 149 Young, O. 1999: pp. 10-16. 150 Wettestad, J. 2000. He focused on 1) access to decision-making procedures, 2) decision-making rules, 3) the regime secretariat, 4) the agenda, 5) involvement of science and 6) verification and compliance procedures. Wettestad then concludes, that “designing effective regimes is primarily a matter of optimal and flexible combinations of all these institutional possibilities” (p. 237), that arise from variation in these factors. 151 Underdal, A. 1992: p. 228 (emphasis in original). See Underdal A. 1992 as reference for the following paragraphs.



decision-making process (such as rules and regulations) and its impact, meaning a “set of

consequences flowing from the implementation of and adjustment to that regime.”152 As this thesis

will focus on the implementation of the CDM, but not on the negotiations leading to the regime, we

can refer to the impact of the CDM with concrete empirical data.

2) Against which standards do we have to assess the object? This urges us to specify the “point

of reference against which actual achievement is to be compared.”153 Relative improvements of the

CDM need to be compared to the hypothetical state of affairs that would exist if the regime had not

been implemented. As every CDM project developer has to describe a baseline scenario in the

absence of his project, this information can be considered as a point of reference to evaluate

relative improvements. The concept of collective optimum goes beyond this and determines to

what extend a collective problem (e.g. climate change) is actually “solved” under the regime.

3) How can we then measure the effectiveness of any given regime? To operationalize

effectiveness is a major methodological challenge as we need standardized units of measurement.

Various, but by far not all, indicators for effectiveness in terms of political change, sustainable

development and its potential to overcome barriers for RE will be developed in this chapter.

David G. Victor, Kal Raustiala and Eugene Skolnikoff examine with the help of 14 case studies how

international environmental agreements are implemented. They define effectiveness as:

“the degree to which international environmental accords lead to changes in behaviour that help to solve environmental problems. [The authors] do not equate an accord’s effectiveness with its ability to eliminate the environmental threat at hand.”154

We will use this definition, but translate “behaviour” into the political environment including

policy, polity and politics. Consequently, the CDM would be “effective” if it can change policy,

polity and politics to help solve environmental problems and mitigate climate change. The ultimate

aim of environmental agreements is to address these institutions, groups and individuals who have

the power to realize changes and solve environmental problems. Victor et al. define these targets

(which can be political organizations, firms, NGOs etc.) as “those actors whose behaviour and

accord ultimately aims to change [...].”155 With regard to the CDM several target groups can be

identified. However, this paper will concentrate on the nation-state and local political authorities

as they are responsible to transmit the CDM into domestic action. This definition of effectiveness

also goes beyond the level of cooperation and pure compliance of an international agreement.

“[The] level of cooperation may be positively correlated with, and in fact causally related to, problem-solving ‘effectiveness’, but the link is hardly compelling. The fact that a regime includes substantive regulations does not tell us anything about the clout of those regulations.”156

Various case studies even suggest that there may be an inverse relationship between effectiveness

and compliance.157 If we define compliance as the conformity with legal standards158 we have to

introduce two further indicators to discuss the effectiveness of the CDM: sustainable development

152 Underdal, A. 1992: p. 229. 153 Underdal, A. 1992: p. 229 (emphasis in original). 154 Victor et al. 1998 : p. 1. 155 Victor et al. 1998: p. 4. 156 Underdal 1992: p. 228. 157 According to Birger Skaerseth, nonbinding standards in the North Sea regime have not enjoyed perfect compliance, but have been more effective that earlier binding standards. In Victor et al. 1998: p. 327-380. 158 This can be seen as a narrow definition of „compliance“ See Victor et al. 1998 p. 39 for more information.



and mitigation of GHG emissions. As renewable energy CDM projects substitute fossil fuels and

therefore per se reduce GHG emissions this criterion does not seem to adequate for this thesis.

This work will moreover focus on data from PDDs to examine its promotion of SD and concentrate on

the developing countries’ perspective on the CDM. In addition to that, we will define effectiveness

in a broader sense when we investigate the potential of the CDM to overcome barriers for RE

deployment. The analytical framework that has been developed in chapter 2.2 will be applied for

this reason. Consequently, effectiveness for this research consists of three different criteria and the

CDM would be effective if it shows significant potential to...

...change policy, polity and politics in a way to help solve environmental problems and

mitigate climate change with political action on the national and sub-national level.

...overcome barriers to the promotion of various kinds of renewable energy sources in the

host countries. Incentives should go beyond the concrete project activity.

...promote sustainable development which is defined by every host country itself.

Effectiveness goes beyond compliance159, but to evaluate effectiveness, criteria of compliance can

be fruitful. “Compliance is not an end in itself but rather a means to achieve effectiveness, which is

in turn a means to manage environmental stresses.”160

This research intends to look for evidence of effectiveness of the CDM in developing countries that

is caused by and that furthers the goals of the international regime. Although this study focuses on

the implementation of RE projects under the CDM an effective CDM alone is not the only factor

explaining changes in the political environment of the host countries that will be investigated.

“Failure to [admit this] could lead the analyst to conclude that implementation was important when in reality other factors caused the observed change in behaviour. Failure to be aware of other factors could also easily lead to conclusions about ways to improve the implementation and effectiveness of international commitments that are not valid under some conditions.”161

This makes it difficult for us to track cause and effect. Finally, we will focus on the following

indicators behind effectiveness to assess the CDM regime. What are the factors that shape

effectiveness? The general CDM rules and regulations are able to provide a framework:162

1) Changing the political environment: The CDM regime would be effective if it:

raises awareness for renewable energy and agenda-setting of the topic

affects policy and promotes strong legislation for renewable energy

affects polity and leads to new institutions and further capacity

affects politics, includes locals and promotes a dialog among various stake-holders

2) Overcoming barriers for renewable energy: The CDM regime would be effective if it can:

overcome investment barriers and make RE projects financially attractive

overcome technical barriers and promote knowledge and technology transfer

overcome political barriers and change prevailing practises

overcome social barriers and increase the acceptance of RE on the local level

3) Promotion of sustainable development:163 The CDM regime would be effective if it:

159 Weiss / Jacobson 1998: “Implementation refers to measures that states take to make international accords effective in their domestic law”, whereas compliance “refers to whether countries in fact adhere to the provisions of the accord and to the implementing measures that they have instituted.” [...] Effectiveness is related to, but not identical with, compliance. Countries may be in compliance with a treaty, but the treaty may nevertheless be ineffective in attaining its objectives. ” 160 Victor et al. 1998: p. 7. 161 Victor et al. 1998: pp. 8 f. 162 The PDDs from RE projects will focus on the issues of additionality, baseline scenario, SD, stakeholder’s comments etc.



has a positive impact on the natural environment (improvement of local air quality, GHG emission reduction, land protection, improved water management, solid waste management, ecological conservation, etc.)

improves the livelihood of the local population (increased socio-economic welfare, poverty alleviation, health improvement, jobs and education, training, etc.)

shows economic benefits (energy supply diversification, lower dependency on imported fuels, greater transmission reliability, energy price stability)

leads to pilot projects and demonstrates RE projects’ feasibility in the host country

Knowing our independent variables, we will now define the CDM as an international regime and

formulate a theoretical framework including the international, national and local dimension.

3.1.3 Defining the CDM as an International Regime

Global environmental politics is an interdisciplinary field of research with unclear borders since its

emergence in the 1960s. This research is implemented in international relation theories of

environmental regimes.164 As the CDM involves global, national and sub-national actors, we will

evaluate the CDM from the perspective of international environmental governance.165

“The CDM is an interesting example of the contemporary rise of network-like governance arrangements in the environmental domain. It involves a multiplicity of public and private actors, and balances between governmental steering and business self-regulation, multilateral institutions and local project practices.”166

This chapter defines the CDM as an international regime. Why do we need regime theory?167 Michael

Zürn168 sets three basic criteria: 1) International regimes are institutionalised patterns of

cooperation between countries and other actors, 2) the cooperation is guided by rules, principles,

norms and decisions making processes, and 3) international actors operate according to these rules

permanently in a certain problem area. These criteria are reflected in the way the CDM works. We

163 Indicators partly adopted from Flamos, A. 2009. 164 For a history and trends in global environmental politics see Dauvergne, Peter 2005: pp. 8-32. 165 Benecke et al. 2008 define the CDM as a new form of climate governance because of two characteristics: First, it systematically involves non-state actors and second, it relies on non-hierarchical forms of coordination. 166 Lövbrand / Rindefjäll / Nordqvist 2009: p. 94. 167 The focus of regime theory is defined by two international relations books: Cooperation under Anarchy and Governance without Government. Both imperatives are important for this work: On the one hand, regime theory helps to explain “the possibility, conditions and consequences of international governance beyond anarchy” and how the CDM works in the field of climate protection in the absence of supranational government. On the other hand, government without governance describes that international actors comply in the absence of threat and physical force, but it is “the legitimacy of rules and their underlying norms” that are fundamental for participating at the CDM. (Rittberger / Mayer 1993: pp. 392-393) 168 Zürn in: Nohlen / Schultze 2004: p. 813.

> Figure 3.3 Three Criteria of Effectiveness and Various Indicators


promotion

of sustainable development

overcome barriers to renewable

energy

changing the political

environment

Effectiveness of the CDM

- natural environment - livelihood of people - pilot projects

- investment barriers - technical barriers - political barriers - social barriers

- raise awareness - affect policy - affect polity - affect politics



will therefore take this concept and define the CDM as an international environmental regime.169

Young defines regimes for natural resources as social institutions or sets of activities that:

“[...] are practises consisting of recognized roles linked together by clusters of rules or conventions governing relations among the occupants of these roles. Like other social institutions, regimes may be more or less formally articulated and they may or may not be accompanied by explicit organisations. [International regimes are] specialized arrangements that pertain to well-defined activities, resources or geographical areas and often involve only some subset of the members of international society.”170

Nations are the primary members of the international society. They negotiate regimes that first of

all affect nations. However, regimes often also address private entities. Rules and widely accepted

norms and principles that govern behaviour are fundamental for regimes:

“International regimes almost always have at their core an accord [...] that establishes specific rules, commitments and decision-making procedures to aid in the process of governance.”171

Political scientists differentiate between two forms of international regimes: treaties (binding

agreements under international law) and voluntary instruments. The CDM in this respect combines

both: Participation for all countries is voluntary, but implementation is subject to strict rules and

regulations. Cooperation is pivotal for international environmental regimes.172 According to Robert

Putnam, cooperation occurs, when “actors adjust their behaviour to the actual or anticipated

preferences of others, through a process of policy coordination.”173 This assumes that actors seek to

realize mutual gains from cooperation. Victor et al. define certain factors that influence

international commitments. Three aspects should be highlighted with regard to the CDM174:

International institutions can lead to more effective international cooperation.

Institutions are more than organizations. They are principles and processes for making

decisions and include certain norms and mechanisms for cooperation and implementation.

As a part of the UNFCCC the CDM is integrated in an institutional body that can facilitate

negotiations, help elicit information flow and reduce the costs for commitments.

Commitments can be more effective when they create linkages with other issues. This is

also true for the CDM. The mechanism combines its fundamental objective to reduce GHG

emissions with the positive co-benefit for sustainable development in the host country.

The nature of commitment in an international regime affects effectiveness. Of course,

the construction of an international agreement, its scope and clarity shape its success. For

the CDM every project has to prove additionality and its potential to reduce GHG emissions

to get approved. SD however varies greatly from host country to host country.

Based on the ideas of neoliberal institutionalism175 regimes are restrained to certain issue areas like

climate change. According to regime theory countries develop a behaviour in the international

169 According to Krasner, regimes are “sets of implicit or explicit principles, norms, rules and decision-making procedures around which actors’ expectations converge in a given area of international relations.” Krasner, S. 1983: International Regimes, Ithaca, Cornell University Press, p. 2. (citation from Young, O. 1989: p. 194) 170 Young, O. R. 1989: pp. 12-13. 171 Victor et al. 1998: p. 8. 172 Haas / Keohane / Levy 1993, p. 4: “The international community’s ability to preserve the quality of the planet for future generations depends upon international cooperation. Successful cooperation, in turn, requires effective international institutions to guide international behaviour along a path of sustainable development.” 173 Keohane 1984: pp. 51-52. 174 Victor et al. 1998 : pp. 8-15. 175 Neoliberal institutionalism raises the question “under what conditions will cooperation emerge in a world with egoists without central authority?” (Axelrod, R. 1984, S. 3) It can be traced back to Hugo de Groot from the Netherlands. He was



system that goes beyond pure rational egoistic interests.176 Although norms and values do not

guarantee a stable regime system, transboundary interests among various actors are the basis for

every regime, as well as the existence of concrete problems in a defined issue-area (e.g. global

warming) and the need to solve them (reduction of GHG emissions).177

“The specific object of regime analysis is voluntarily agreed-upon, issue-area specific normative institutions created by states and other international actors, which are studies as the mainstay of establishing intentional social order by self-regulation in international relations.”178

All this is true for the CDM as a part of the Kyoto Protocol, where nations agree to cooperate within

a specific framework with norms and regulations against climate change. This leads to the question

if we can define the CDM as an environmental regime? The field of environmental politics has seen

more and more international cooperative action as worldwide economical collaboration along with

transboundary global environmental problems increased since the 1970s.179 Global environmental

problems need cooperation. Yet, there is no central authority in the international system with the

power to implement binding norms and enforce it against antagonistic actors.

Fundamental preconditions for collaboration are collective interests and mutual benefits for all

participants.180 But even identical interests among actors do not inevitably lead to collective

action.181 This can be explained with a structural dilemma nations are permanently exposed to in

the international system. Three factors are characteristic182: uncertainties about consequences of

other nations’ behaviour, distribution of costs and benefits, the attractiveness not to participate.

Countries face two alternatives: long-term insecure cooperation or short-term benefits due to

unilateral non-cooperative behaviour. According to regime theory this dilemma can be overcome

with the help of international regimes. Participants in these regimes are required to subordinate

their current self-interests under the norms of the regime for the greater good.183 A regime provides

nations and non-state actors a framework to solve problems in a certain issue-area.184 The CDM can

be characterized as an international environmental regime. However, dominant regime approaches

in international relations show serious deficits in the context of this research paper.185 Theses

should be mentioned here before further theoretical incentives on the interplay between the CDM

and domestic politics will be discussed:

arguing against the strong realistic school, that states are not in a constant struggle for survival against each other. Instead, states are bound to norms, rules and institutions in the international system. (See Krell, G. 2007: p. 65) “Institution” in this respect means a set of customs and practices to achieve collective goals. (See Czada, R. 2004: p. 363). According to Rational-Choice Institutionalism actors aim to achieve certain rational targets. Institutions have a clear, rational function. (See Benz et al. 2007: pp. 167-169). This is true for the CDM, where investors and countries which promote projects in developing countries have clear targets. The host country on the other hand benefits from the investment. 176 According to Krell, G. 2007 (p. 68) cooperation within regimes is characterized by four mechanisms: principles, to formulate a certain problem and collective goals to solve it, norms to set up general codes of conduct on the way to achieve these goals, regulations to concretize norms as substantial provisions and procedures to regulate the handling with norms. 177 For an overview on regimes see Benz et al. 2007: pp. 226-239. 178 Rittberger / Mayer 1993: p. 393. 179 See Keohane / Nye 1977 and Keohane 1984. 180 Woyke, W. 2000, p. 449. 181 This it is currently the case in the field of climate change. Although all Parties to the UNFCCC acknowledge the need for GHG reduction to prevent dangerous global temperature increase, COP 15 in Copenhagen failed to agree on a binding treaty. 182 Krell, G. 2007, pp. 67f. 183 Woyke, W. 2000: p. 456. 184 Woyke identifies various causes for participation. Three of them are relevant in this context: 1) Actors cooperate to realize absolute benefits for themselves, 2) The ability to cooperate is more likely under regimes that already exist and 3) asymmetric power constellations can be supportive, when more powerful actors are able to guarantee benefits for weaker parties. (Woyke W. 2000 p. 451) The CDM fulfils these conditions. Implemented under the UNFCCC the CDM helps industrialized countries to realize GHG reductions less costly and provides benefits for developing countries. 185 See Okereke / Bulkeley / Schroeder 2009.



1) The nation-state is often seen as a monolithic actor. The nature of the country can be

recognized as a “black box”, undermining domestic (political) conditions and actors.

2) International-domestic interrelations are often underestimated. The international and

domestic arenas are examined apart from each other. Such a demarcation can easily

oversee important links and patterns of interaction.

3) Non-state actors are underrepresented. The pre-eminent status of the nation-state in

international regimes and global governance does not reflect the importance of other actors

such as NGOs or private businesses.

With the CDM at work the human-constructed institutions necessary to communicate and cooperate

already exist. Now we have to ask whether and to what extend these institutions on the

international level as well as the national and sub-national circumstances influence each other. This

leads us to the conclusion, that regime theory alone will not be sufficient to investigate the CDM

and the interplay between global, national and local political actors. We will therefore develop a

broader analytical framework in the following chapter.

Arild Underdal and Kenneth Hanf came to the same conclusion when they investigated how

international environmental agreements penetrate societies and how feedback influences the

international arena. We will take the work on international regimes as a fruitful starting point and

enhance it with incentives from various authors like Peter Evans, Harold Jacobson and Robert

Putnam as well as Robert Keohane and Marian Milner who are concerned about the interactions

between domestic politics and international environmental regimes.186 Miranda Schreurs and

Elizabeth Economy examine how internationalization of environmental politics as a response to

emerging global problems affects domestic institutions and decision-making processes. They

conclude from seven case studies that global-domestic interactions can explains environmental

(non-)cooperation.187

3.2 Three Dimensions of Interaction: International, National and Local

Global environmental problems like climate change cannot be solved by unilateral actions alone and

need increased cooperation among nation-states. This very simple fact affects core ideas of

international relations theory, such as sovereignty, agency, and policy levels. It is the source for

broad discussions among political scientists.188 International regime analysts tend to focus on the

emergence and decline of international regimes and their specific content.189 They concentrate on

the various forms of interactions between the international and the national level. Volker

Rittberger and Peter Mayer describe three tasks of regime analysis: Explaining the formation and

demise of regimes, investigate their content, substances and structure and determine regime

186 Evans, P. et al. 1993 / Putnam 1998 / Milner, H. 1997 / Keohane and Milner (editors) 1996. 187 See Schreurs / Economy 1997: pp. 1-18. 188 Biermann/Dingwerh 2004 show, that collaborative problem-solving arrangements emerge and lead to a rethinking from a state-centric analysis to international interdependence. They argue that “global environmental change decreases the capacity of nation states to effectively fulfil their definitional functions without the cooperation of other states (and, potentially, nonstate actors).” Furthermore, global environmental issues need complex multilevel environmental policy-making on the global, national and local level. 189 See Young, O. 1989 as one example.



consequences.190 The last point, which is considered to be “still heavily under-researched”191, will

be crucial for this paper. As the implementation of the CDM regime goes beyond compliance and

involves the local level, a two-dimensional approach will not be sufficient to investigate the

effectiveness of the regime. This chapter will take this into account. It will first give an overview on

the impact of domestic politics on in international regimes, before a second part will reveal the

influence of international agreements on domestic politics. Finally, a third section will illustrate the

meaning of the local level. This chapter aims to create a comprehensive framework on the

multilevel interactions that have to be examined to describe the effectiveness of the CDM.

“Students of international relations often differ sharply from students of domestic society in the assumptions they make about the significance of social institutions. Most observers of domestic society simply take it for granted that institutions [...] are major determinants of collective outcomes in human affairs. [...] Orthodox students of international relations, by contrast, take the view that social institutions are of little or no significance as determinants.”192

This is important, because regimes can be seen as social institutions rather than formal inter-

governmental arrangements. The next chapters will show that none of these points of view can be

applied and that this sharp dichotomy cannot be justified. The CDM as part of an international

climate regime matters in international relations just as it matters in domestic societies.

3.2.1 Beyond Bargaining: How Domestic Politics Affect Implementation

The CDM became possible only with the support of developing countries. The criteria of SD assured

their approval after long negotiations leading to the Kyoto Protocol. Theory about international

bargaining and domestic politics gives us a first idea about the complex relationship of international

treaties and the domestic political environment:

“If we wish to determine whether or not regimes ‘matter’ [...] we need to trace carefully the processes, structures and values at the national level which determine the manner in which such agreements are carried out and responded to.”193

Political theories like realism refuse the influence of domestic politics on international relations.

Others have overcome these limitations of pure systemic theories.194 Discussions range from regional

integration and spill-over effects (Karl Deutsch and Ernst Haas), over interdependence and trans-

nationalism (Joseph Nye and Robert Keohane) to structural factors (Peter Katzenstein and Stephan

Krasner). This gives us a first insight into the vast complexity of this issue. However, a lack of

understanding is still true for the impact of the domestic sphere on the implementation of an

international regime such as the CDM.195 Putnam has been the first to develop a framework for

understanding how international diplomacy and domestic politics interact196 concentrating on

factors determining a country’s position in international negotiations that is not only influenced by

190 See Rittberger / Mayer 1993: pp. 406ff. Moreover, they provide a table of dependent variables of various kinds of potential regime consequences with three different units of analysis (government, society, issue area) and five dimensions (behaviour, capabilities, cognitions, values and interests, constitution). 191 Rittberger / Mayer 1993: p. 428. 192 Young, O. 1989: p. 58. 193 Underdal, A. 1998: p. 167. 194 Moravsik, Andrew in Evans et al. 1993: p. 6. 195 Putnam describes a general lack of understanding of interrelations: “Domestic politics and international relations are often somehow entangled, but our theories have not yet sorted out the puzzling tangle.” (Evans et al. 1993: p. 431) 196 Evans, P. et al. 1993, p. 431-468.



the bargaining between negotiators, but also by domestic discussions within certain interest groups

about ratification and implementation.197 Putnam finally uses the metaphor of a two-level game:

“At the national level, domestic groups pursue their interests by pressuring the government to adopt favorable policies, and politicians seek power by constructing coalitions among those groups. At the international level, national governments seek to maximize their own ability to satisfy domestic pressures, while minimizing the adverse consequences of foreign developments.”198

The two-level game emphasises the statesman as the central strategic actor and combines

international and domestic constraints with regard to international negotiations.199 This can be

applied to the UNFCCC: Developing countries only agreed to a mechanism that promotes SD to

overrule national opposition. This illustrates how interrelations between domestic politics and

international preferences play a role in regime negotiations. On the other hand, international

diplomacy can also reshape domestic interests as well as respond to them. The hope for domestic

restructuring might even be an underlying impetus for national governments in negotiations:200

“International negotiations must be seen as a double-edged process in which every actor tries to take into account expected reactions on both the domestic and the international levels. [...] Domestic goals are pursued via international moves, and domestic politicking is central to international negotiation. The role of international and domestic factors in the determination of outcomes is simultaneously and mutual.”201

Detlef Sprinz and Martin Weiß tested these assumptions in the specific field of climate change and

concluded that national governments are likely to be influenced by public pressure groups especially

during a challenging process of ratification.202 Milner also refuses the realist’s perspective and

confirms the importance of domestic politics for international relations.203 He argues that domestic

factors and considerations influence, international negotiations, terms of any international

agreement and “all aspects of cooperation.”204 International and domestic factors determine

whether cooperation is possible and what this collaboration will look like.205 Milner argues that the

nation-state can no longer be seen as a unitary actor in international relations and he concludes

that the addition of domestic politics, internal divisions and preferences and the assumption of

polyarchic countries make international cooperation (and conflict) even less likely than a pure

international game among unitary nations.206

197 Putnams approach has been modified and adopted in various ways. Ásgeirsdóttir, A. 2008 for example investigated domestic influences on international negotiations about distributive conflicts in the case of several fishing agreements between Iceland and Norway. According to him, the existence of international regimes can foster cooperation and the national negotiators international choices can be explained with domestic constraints. 198 Putnam, Robert D. 1988 (citation from Evans et al. 1993: p. 436.) 199 Moravsik, Andrew in Evans et al. 1993: p. 18. 200 Evans et al. 1993: p. 416. 201 Evans et al. 1993: p. 397. 202 About domestic politics and global climate policy see Sprinz and Weiß in: Luterbacher/Sprinz 2001: pp. 67-94. 203 According to Milner previous literature focused on international factors to explain cooperation among states. 204 Milner 1997: p. 234. 205 Milner 1997: p. 238: „Political leaders negotiating a cooperative agreement will always be looking over their shoulders at the domestic game and trying to make sure that the agreement is compatible with their domestic constraints.“ The national ratification process is an important part of the domestic contest over any international agreement. According to Milner, three central independent variables explain (non-)cooperation among states: interests of actors (structure of domestic preferences), domestic political institutions (in the legislative process) and the distribution of information domestically (that create inefficiencies and political advantages). Milner shows that the structure of domestic preferences (interests) differs by issue area, a country’s political institutions determine the nature power sharing nationally and that interest groups acting as endorsers can be an important source of information for decision makers. (See Milner 1997: pp. 3-29) 206 Milner 1997: p. 256: „Assuming polyarchy implies that international relations operate differently. It means that all policy (foreign policy, too) will be the result of an internal compromise, reflecting the preferences and power of domestic groups.” Olav S. Stokke later stresses the meaning of domestic discursive patterns in the formation of international environmental regimes. He concludes that processes of justification and legitimacy, arguments, disputes and the role of knowledge shape and modify state interests and also its position on environmental agreements. (Stokke, S. In Underdal, A. 1998, pp. 129-148)



This early literature initially focused on the meaning of processes at the domestic level for regime

formation. Nowadays, effectiveness and the process of implementation are receiving more attention

in the literature about international environmental regimes. After negotiating an international

environmental agreement its implementation will be up to domestic political decisions, “taken in

the context of home-grown electoral interests, national discourses, and domestic political

institutions.”207 This chapter argues that events and decisions on the international level cannot be

understood without a profound knowledge of the national political environment.

“If we wish to understand what is likely to happen at the international level, it is necessary to examine the processes, structures and values at the national unit level which determine the manner in which national positions on negotiating international agreements are arrived at and the ultimate agreements are then carried out.”208

We will now focus on the process of implementation that is vital for the effectiveness of

environmental agreements according to David et al. who describe implementation of international

environmental accords as “an under-explored aspect of international relations.”209 Their observation

shows that countries normally evaluate their ability to comply before they actually agree to any –

especially legally binding – commitments. “In short, legally binding agreements often codify what is

already under way or reflect actions that parties are confident they can implement.”210

Uncertainties about implementation and other parties’ commitment furthermore lead to a strong

demand for information about implementation options. Participation of target groups (groups or

individuals that must change behaviour to comply) leads to more effective commitments:

Associations of industries and individuals can provide implementation expertise on the range of

policy options, financial and technical feasibility, costs and benefits. Target group participation

increases the flow of information and makes global cooperation more effective. Vice versa, strong

monitoring and verification processes can contribute to the effectiveness of commitments.

Victor et al. show that nonbinding agreements might even be more effective than binding ones,

because it is more likely for countries to agree to voluntary actions, they usually do not involve

ratification and are easier to implement. Nonbinding instruments can also be changed in the light of

new information with less effort; they allow more flexibility in participation; they can formulate

specific targets more clearly; and they are “more likely to embody ambitious commitments.” 211 As

a result, national governments might face higher public pressure and explore at least the need for

additional regulations that otherwise would not have been considered. Nonbinding instruments also

facilitate “learning by doing, which has allowed more effective cooperation when it has been

unclear how best to cooperate.”212 Victor et al. conclude that the inclusion of nonbinding aspects in

tandem with binding measures can make an international regime more effective.

207 Harrison, K. / Sundstrom, L. 2007: p. 2. The authors compare the impact of domestic factors on the Kyoto Protocol. 208 Underdal / Hanf 2000: p. 7. 209 Victor et al. 1998: p. 26. They demonstrate in 14 case studies that no standard model of implementation exists and both the means and outcomes are often uncertain, depending on the issue area, the number of actors involved and political interests being affected. “Often a country adopts an international accord without a clear plan for putting the commitments into practice.” (Victor et al. 1998: p. 559.) Governments often cannot guarantee that domestic performance will comply with the international commitment they have just agreed to. However, most countries comply with environmental agreements. 210 Victor et al. 1998: p. 662. 211 Victor et al. 1998: p. 49. 212 Victor et al. 1998: p. 687.



Finally, private actors play a vital role for the CDM. In the light of globalization the concept of

global governance highlights the role of private and non-state parties in trans-national multilevel

governance and their influence to implement norms and solve problems with cooperation in certain

issue areas. Taking governance as a weakly institutionalized interplay of various actors the concept

enhances the perspective of regime theory with its focus on cooperation between nations and it

takes trans-national actors into account.213

3.2.2 The Impact of Internationalization on Domestic Politics

According to Young “collections of rights and rules” from international regimes “are commonly

supplemented by extensive sets of regulations and incentive systems” on the domestic level.214

Public authorities specify under which conditions certain (private) actors are to operate. Regime

implementation is not only monitored on the international level. Domestic authorities furthermore

develop agencies or institutions to oversee compliance with the regime. This chapter will describe

how the implementation of an international regime affects domestic politics.

“If we wish to determine whether or not regimes ‘matter’ [...], we need to trace carefully the processes, structures and values at the national level which determine the manner in which such agreements are carried out and responded to.”215

The CDM is often seen as a market mechanism to facilitate climate-friendly investments in

developing countries. Not surprisingly, literature about the affects of internationalization on

domestic politics often has an economic focus.216 Jeffry Frieden and Ronald Rogowski217 for example

concentrate on the policy preferences of socioeconomic actors. They argue that internationalization

affects their preferences within countries in broadly predictable ways based on the actors’

economical preferences, although political outcomes cannot be predicted simply based on economic

interests. Internationalization does however increase the national economy’s sensitivity for world

market trends and shocks, but differs from country to country, depending on the incentives from

internationalization, the institutional context, interest groups and politicians. Frieden and Rogowski

conclude that political institutions can also hinder and even refract effects of internationalization.

Geoffrey Garret and Peter Lange218 discuss how economic preferences, policies and institutions

interact with one another in the light of internationalization. Although no single deductive theory

exists, they show that institutions matter in dynamic processes of political (and economical)

change. Both the institutional context of politics within nations and the rapidly changing

213 Global governance includes the impact of globalization on international regimes and gives a vital input for investigating international regimes involving private actors. However, this concept should only be mentioned rather than fully applied and developed in this work because of its broadness and complexity. The focus on governance beyond the national state goes too far for this research which will concentrate on the interaction between local, national and international politics and the impact of CDM projects on national political structures and legislation. The meaning of private actors in these cases however should not be underestimated. For further reading see Benz et al. 2007; Reinicke, W. 1998; Zürn, M. 1998. 214 Young, O. R. 1989: p. 17. Refer to Young 1989 for more information about international regimes in theory. 215 Underdal, A. 1998: p. 167. 216 Milner and Keohane argue that internationalization and domestic politics are inextricably interrelated. (Milner/Keohane 1996 / Milner 1997) Politics within countries cannot be understood “without comprehending the nature of the linkage between national economies and the world economy.” (Milner/Keohane 1996: p. 3) Internationalization describes processes that produce observable flows of goods, services, and capital. 217 Frieden, Jeffry A. / Rogowski, Ronald in: Milner / Keohane 1996: pp. 25-47. 218 Garrett, Geoffrey / Lange, Peter in: Milner / Keohane 1996: pp. 48-75.



international environment in which domestic politics are embedded are important to understand

the linkage between (economic) internationalization and the political behaviour of domestic actors.

“Variations in domestic political outcomes can only be explained by supplementing an analysis of preferences and preference change with attention to the institutional context of politics.”219

The formation of an international regime like the CDM catalyses effects of internationalization on

domestic politics, that leads to two hypotheses based on Frieden / Rogowski and Garrett / Lange:

1. Internationalization affects the constraints and opportunities facing social and economical

actors, and therefore their policy preferences with regard to their choices about which

policies will best achieve their goals. The CDM as an additional economical incentive for

climate-friendly technologies is therefore expected to broaden political choices to promote

technologies such as renewable energy sources in developing countries.

2. Internationalization affects the constraints and opportunities faced by governments. As

incentives change due to internationalization, changes also on the levels of economic

policies and political institutions are likely. The CDM is therefore expected to promote

political and institutional change on the domestic level.

These hypotheses derive from an economic perspective of international relations. Capital flow,

financial markets and other economical variables play a central role with regard to political change:

“The clearest effect of international has been to undermine governments’ autonomy in the domain of macroeconomic policy [...]. A second notable effect has been to create the ‘political space’ necessary for leaders to embark on major political reforms.”220

This thesis will concentrate on political changes coming from these financial incentives from the

CDM and raise the question if the CDM regime has really undermined the autonomy of the national

government and the potential to boost reforms in the field of renewable energy.

Fundamental literature about international environmental regimes also raises the question how

international agreements and institutions can respect the principles of state sovereignty and

contribute to the solution of complex global problems at the same time. Robert Keohane, Peter

Haas and Marc Levy argue that national governments themselves cannot solve international

environmental problems on their own and need to agree to binding agreements: “As long as national

governments protect national interests and refuse to grant significant powers to supranational

authorities, [...] the survival of the planet is in jeopardy.”221 The authors identify three aspects how

international institutions can affect the national political environment: 1) they can contribute to

more appropriate domestic agendas on the international level (agenda setting) to boost concern, 2)

they can contribute to comprehensive and specific global policies (international policy formulation)

to facilitate agreements and 3) “they can contribute to national policy responses which directly

control sources of environmental degradation”222 (national policy development). International

measures bear the potential to overcome domestic barriers to reach harmonized national measures.

219 Garrett, Geoffrey / Lange, Peter in: Milner / Keohane 1996: p. 75. Internationalization is seen as the central explanatory variable with far-reaching effects on domestic politics. It is mostly restricted by two dependent variables: national policies and domestic policy institutions as well as policy preferences of relevant domestic socioeconomic or political actors towards national policies and institutions. 220 Milner / Keohane 1996: p. 256. 221 Keohane, R. et al. 1993: p. 3. 222 Keohane, R. et al. 1993: p. 8.



National policy development looks for mechanisms linking specific characteristics of an international

regime with behavioural outcomes and policy efforts on the national level. Effective international

regimes should help countries to foster the transfer of information and expertise and to “possess

the political and administrative capacity to make the domestic adjustments necessary for the

implementation”223 of agreements.

According to Keohane et al. international environmental regimes work effectively when they lead to

“high level of governmental concern, a hospitable contractual environment, [...] and sufficient

political and administrative capacity” on the national level. Effective institutions need to penetrate

the nation-state politically to a high degree (often with the help of political allies and private actors

outside the formal institutional apparatus), but respect the legal integrity and sovereignty of the

state at the same time. International institutions need to build networks to work effectively:

“International institutions do not supersede or overshadow states. They lack resources to enforce their edicts. To be effective, they must create networks over, around, and within states that generate the means and the incentives for effective cooperation among those states.”224

International environmental regimes raise governmental concern with normative pronouncements

and scientific reviews. They provide information, raise awareness for a certain environmental issue

and might also magnify public pressure. “Institutions can also increase concern by linking issues.”225

A developing country may have low concern over GHG emissions reductions, but the CDM links the

issue to SD and benefits for the host country. Regimes furthermore provide levels of effective

communication; create ongoing negotiating processes and enhance the contractual environment to

facilitate the development and maintenance of international agreements. Monitoring and

verification increase the credibility of the agreement. Regulations do not only regulate, “they help

generate political concern, they set normative standards, [...] and they legitimate financial

transfer.”226 Building national capacity is especially important for less developed countries. They

might lack the political legitimacy or honest bureaucracies necessary to implement the regime.

International institutions can help to overcome these barriers and provide technical assistance.

“International environmental institutions, when they are effective, are not merely rule-making bodies. They are also vehicles for transferring skills and expertise, and for empowering domestic actors who are motivated to solve domestic problems of international importance.”227

Arild Underdal and Kenneth Hanf investigate the complex political process of how international

environmental management penetrates domestic society and politics.228 According to them national

positions influence the international sphere and international agreements regulate domestic

implementation. Behaviour on the national level depends on the problem structure and the

problem-solving capacity of a country. Political capacity in this respect is a function of the

institutional setting, distribution of power among actors involved and the skill and energy to design

cooperative solutions. Underdal argues that policy change is characteristic for successful regimes:

223 Keohane, R. et al. 1993: p. 20. 224 Keohane, R. et al. 1993: p. 24. 225 Keohane, R. et al. 1993: p. 400. 226 Keohane et al. 1993: p. 404. 227 Keohane et al. 1993: pp. 414-415. All “three paths of effectiveness” (concern, contractual environment and capacity) cannot be considered isolated, as they are complex, interactive and interlinked with each other. 228 Underdal, A. 1998: pp. 149-170.



“Damage to the environment typically occurs as a side-effect of perfectly legitimate activities undertaken for other purposes, such as the production and consumption of energy and goods. A policy designed to protect the environment cannot be therefore neatly compartmentalized and just added to other policy commitments. In order to succeed it will have to penetrate and modify those activities and policies that cause environmental damage in the first place.”229

Agreements to international regimes should consequently lead to domestic policy change. This

however does not happen out of the blue and might need time for constant progress.230 Underdal’s

analysis indicates that “the focus will gradually shift from the kind of general ‘macro-formulas’ [...]

towards specific options for action [...].”231 Domestic ministries and agencies play an important role

in dealing with international problems as they build up institutional capacity to participate in

international decision-making processes.

After ratifying and translating international commitments into national legislation it comes to actual

implementation. New regulations enter into force in an already existing regulatory space with

supportive and opposing policy, societal and bureaucratic forces. International environmental

agreements might carry high costs for various interest groups (e.g. producers and consumers of

goods) that were not clear at negotiations. Effectiveness depends on the participating states, their

will and ability to achieve change within their societies. Or in other words: “The prove of the

international pudding will be in the national and sub-national ‘eating’ [...].”232 Implementation is

critical for success. Referring to Putnams two-level game, the “implementation game” represents a

third arena for Underdal with its own political logic and unforeseeable effects for negotiators:

“Even though the agreement was concluded in the belief that adequate political support would be forthcoming [...], it may still prove difficult, if not impossible, to deliver on the commitments made [...] before the agreement was negotiated.”233

Young finally focuses his research on regimes effectiveness on sources and mechanisms of actors’

behaviour. He argues that regimes have the power to channel behaviour on the international, but

especially on the domestic level in a way to solve a specific (environmental) problem.

“A regime that channels behaviour in such a way as to eliminate or substantially ameliorate the problem that led to its creation is an effective regime. A regime that has little behavioural impact [...] is an ineffective regime. [...] Effectiveness is a matter of the contributions that institutions make to solve the problems that motivate actors to invest the time and energy needed to create them.”234

Young identifies four mechanisms how international environmental regimes can influence behaviour

on the national level: 1) Regimes set standards or requirements that subjects have to meet and they

work more effectively by eliminating opportunities to violate these regulations than by increasing

incentives for compliance (coercing compliance). 2) With growing concern about the environmental

issue the regime can become more and more influential over time (enmeshing states). 3) Regimes

229 Underdal, A. 1998: p. 152. 230 Negotiations on climate change first had the aim to reach a common understanding that something needs to be done against global warming. Domestic impact at that stage was hard to define. This changed as alternative rules became more specific and local authorities participated who see their domain affected. They are finally responsible for changes when it comes to implementation. In the case of climate change, the global concern to control anthropogenic global warming has now been translated to energy prices, industry efficiency and renewable energy on the domestic level. Consequently, global issues that are relevant to international environmental regimes determine politics as they affect (specific groups of) the domestic societies. 231 Underdal, A. 1998: p. 156. 232 Underdal, A. 1998: p. 157. 233 Underdal, A. 1998: p. 159. Implementation of environmental regimes can also lead to domestic capacity building. Environmental agencies should be strengthened relative to other authorities to guarantee compliance. International actors and NGOs can mobilize public support for the environmental agreement and monitor implementation performance. 234 Young, O. 1999: pp. 1-3. Compare Young, O. 1999: pp. 265-271 for the next paragraph.



can also foster environmentally friendly, but financially unattractive decisions with long term

benefits (shaping expectations). 4) Regimes also influence national behaviour by initiating processes

leading to desired results and further commitments (stepwise processes).235

3.2.3 Bringing the Local Level into Account

Most analysis of climate change policy focuses on the establishment of international treaties as the

main driver of change.236 This chapter argues that we cannot investigate the effectiveness of an

international regime without taking the local level into account: “Climate change is a problem that

can only be adequately addressed if action is taken at all levels of government: international,

national, regional, and local.”237 The concept of multilevel governance provides a good starting

point to understand the relationship between and the interference of various actors for designing

and implementing policies from international to national and local levels of action.238

Any multilevel governance framework includes two dimensions of action and influence: the vertical

dimension across levels of governance and the horizontal dimension of governance. This is especially

important with regard to the implementation of international environmental commitments, where

national and local authorities have to work closely together (vertical dimension) and various local

actors as well as different institutions and ministries of the central national government have to

coordinate their actions, build networks and learn from each other (horizontal dimension).

“The vertical dimension of multilevel governance recognises that national governments cannot effectively implement national climate strategies without working closely with regional and local governments as agents of change. [...] A two-way relationship exists between local and national action on climate change as each can enable or constrain the other. The horizontal dimension of multilevel governance acknowledges the opportunity for learning, information transmission and cooperation between cities or regions and national governments, including local jurisdictions in the same metropolitan area. Horizontal governance activities can give business, research and environmental nongovernmental organisations influence in the policy dialogue process.”239

It is the core assumption of multilevel governance that in an institutional differentiated system,

actors from various levels depend on each other and therefore have to coordinate their activities,

mainly through negotiations.240 These levels can be separated by territory; authorities on each level

have varying decision making competences. Multilevel governance describes patterns of interaction

and coordination, but concentrates on institutionalized forms.241.

235 “The role of regimes is to alter incentives in such a way as to prevent individualistic behaviour likely to lead to collective-action problems in situations involving strategic interaction.” (Young, O. 1999: p. 269) 236 See literature in the previous theoretical chapters and Young 1989 as a specific example. 237 Corfee-Morlot et al. 2009: pp. 85. 238 For more details about multilevel governance: Hooghe/Marks 2003. 239 Corfee-Morlot et al. 2009: pp. 8-9. This opens the way for a variety of key barriers and obstacles for effective implementation, ranging from issues of authority to resources and capacity, from political tensions between national and local policy priorities to differing political preferences and a general lack of communication, coordination and negotiation both on the vertically and the horizontal dimension. 240 For information about multilevel governance in this paragraph see Benz et al. 2007According to an economical perspective on multilevel governance „competition” among each other is an important form of coordination – especially to attract businesses. This would mean a regional or local competition for (international) investors as it might be the case with regard to the CDM. 241 Implementation of regimes is a multilevel complex of norm setting and rule implementing, depending also on local actors. Analysts of multilevel governance differentiate between 1) intergovernmental relations between states (the two-level game concentrates on international negotiations and relations between international positions and national preferences), 2) the European system (where various state- and non-state actors are involved in policy formulation) and 3) the federal state (focusing on patterns of coordination and competition between states and on the local level with regard to implementation.) Research about less institutionalized forms of governance within the national context is underdeveloped.



“Implementation ‘failure’ and ‘success’ are not only a matter of ‘will’ (deliberate choice) but also as a matter of ability and capacity to govern. National decision-makers have to depend on other, sub-national public and private actors to supply important informational inputs or services needed to carry out the implementation strategy chosen.”242

While the international community struggles to agree to a post-Kyoto agreement on climate change,

a growing number of municipalities and regions have taken initiatives and became driving forces to

fight global warming.243 We should therefore include the local level into our theoretical

considerations as Underdal already recommends. According to him, bargaining processes between

the national government and sub-national entities about implementation are necessary and might

even prevent international commitments to which the national government has already agreed:

“To the extend that the authority does what is required to implement an international agreement is in the hands of sub-national bodies and officials, one can easily imagine that environmental agencies at the national level will have to bargain with these sub-national actors over the conditions of implementation. [...] The implementation of international environmental agreements at the national level will always remain a multi-actor and multi-level process.”244

This is critical for national decision-makers that depend on public authorities and private actors.

Authorities on the ground might also be in a weaker bargaining position confronting powerful social

actors or ‘big businesses’. Large companies can choose location and “more easily play off small

municipalities [...] against each other”245 than it would be the case if the state negotiated on behalf

of all of them. There are several reasons for national governments to cooperate with local

authorities and stakeholders on the issue of climate change: Local authorities can serve as a vehicle

for an effective implementation of national and international policies, they can consider climate

change in local infrastructure plans and development patterns and experimentation at the local

level might provide experience for a broader dissemination of successful innovations and lead to

bottom-up diffusion to influence national and even international levels.

Local authorities have an impact on at least five stages of the policy cycle:246 1) Political leaders as

well as private and public pressure can increase the awareness of the topic of climate change

(agenda setting), 2) cities and municipalities can develop strategies and mechanisms for climate-

friendly action (policy formulation), 3) the local government’s capacity and awareness is critical for

regulatory performance (implementation), 4) local authorities can give feedback and enforce

frameworks for monitoring and measuring outcomes (policy evaluation), and 5) successful and best

practice policies can be taken up more broadly based on local experience (dissemination).

An OECD report identifies at least three institutional models of locale-national climate policy

linkages: Nationally led or “top-down” enabling frameworks (where national policy mainly

influences local authorities, a framework requires local authorities to take climate policy into

account and / or national incentives provide competencies necessary for local action), locally led or

242 Underdal/Hanf 2000: p. 15 (emphasis in original). 243 See Corfee-Morlot et al. 2009: pp. 30-31. Local mitigation and adaptation policies include public transportation, renewable energy use, energy efficiency, waste management or education. See for local climate initiatives: „Local Government Climate Roadmap” (www.iclei.org/index.php?id=7694) [retrieved 12.02.2010]. ICLEI (Local Governments for Sustainability) includes over 1,074 local governments, representing 300 million people in 68 countries. 890 of ICLEI‘s members have committed to reducing their CO2 emissions to 20 percent below 1990 levels by 2012. 244 Underdal, A. 1998: p. 165. Especially when the agreement deals with global environmental problems that have no direct consequences on the local level and therefore sub-national cost-benefits calculus are different from national ones, local actors might be even less favourable towards environmental restrictions and instruments than the national government. 245 Underdal, A. 1998: p. 166. 246 Corfee-Morlot 2009: pp. 31-44. For the policy cycle see chapter 3.1.1 of this work.

http://www.iclei.org/index.php?id=7694



“bottom-up” action (where local authorities are allowed to go beyond national requirements and

learning from experience on the ground diffuses to steer regional or national policy making and

leads to change on higher political levels) and hybrid models (showing features of both previous

models). 247 The hybrid institutional model can be observed where:

“[...] national and/or regional governments on the one hand, are working closely with local authorities on the other hand, to encourage experimentation and innovation at the local level to respond to climate change, and ultimately to identify successful lessons for broader diffusion elsewhere.”248

The OECD also reveals four observations of “good multilevel climate change governance”249 that will

be discussed with regard to the CDM in the conclusion to evaluate its effectiveness:

1) National policies are important to provide a strong and reliable framework. They are

central to enable local action against climate change and provide incentives to design and

implement local climate policies with regard to mitigation and adaptation.

2) National governments can use the local level as a testing ground for experimentation.

Successful, or in our terms effectively implemented projects can demonstrate political and

financial feasibility and potentially lead to broader, nationwide diffusion.

3) Collaborative capacity building on climate change increases capabilities for actions on the

ground. National resources and capacity building can raise awareness among local authorities,

integrate understanding of climate change in local activities and reveal potentials for

appropriate actions of mitigation and adaptation.

4) Action against climate change is a driving force for local economical development. Climate

change mitigation and adaptation can be a source of regional economic development. National

and local governments need to cooperate to identify synergies to fight global warming on the

local level, moving away from perceiving growth and sustainability as an either / or proposition.

As negotiations on the UNFCC level face major barriers for further climate commitments by national

governments, more and more attention is given on alternative environmental governance initiatives

on the local and regional level. Several case studies about initiatives in developing countries are

discussed in the literature.250 They conclude that despite reluctant national governments “there is

enough space for alternative structures and approaches in both developed and developing

countries”251 for climate-friendly action. Although local actors play a significant role in theory, the

CDM is criticised for not involving stakeholders and the people affected on the ground. The impact

of the local level varies from country to country as the national government with the DNA regulates

its access. Eva Lövbrand et al. conclude that the CDM fails to meet certain input and output

legitimacy standards, but it reveals “more advanced mechanisms for transparency, accountability

and stakeholder participation than most other climate partnerships.”252 Annex 6 provides a summary

247 Corfee-Morlot et al. 2009. The report shows the meaning of metropolitan areas for climate change. Linkages between national, regional and local policies are made and good practice with regard to climate actions on the local level examined. 248 Corfee-Morlot et al. 2009: p. 54. The hybrid model also highlights the role of private actors and provides a model for effective implementation of international regimes: National governments provide a general framework with incentives and learn from experience on the ground for changes in national policy. 249 See for details Corfee-Morlot et al. 2009: pp. 85-87. 250 For example: Cunha / Rei 1993 (case study of Sao Paulo) Teng / Gu 2007 (national and local policy opportunities in China with case studies of Beijing, Guangdong and Shanghai); Mukheibir / Ziervogel 2007 (adaptation in Cape Town). 251 Cunha / Rei 1993: p. 21. 252 Lövbrand / Rindefjäll / Nordqvist 2009: p. 95. Benecke G. 2007 (a) reveals shortcomings of the CDM in terms of participation and representation especially of developing countries and local stakehoders under the climate regime.



on key actors, functions and tools at different scales of action on various political levels with regard

to climate change and multilevel governance.

3.3 Synthesis: Towards a Three-Dimensional Approach

Let us summarize the various interactions between the local, national and international dimension.

1) Politics is not just politics. When we study the impact of the CDM on political conditions and

vice versa, we need to distinguish between content (policy), form (polity) and process (politics).

2) Effectiveness includes three major indicators. We have defined our independent variable by:

the potential of the CDM to 1) overcome barriers to RE projects in developing countries, 2)

support sustainable development and 3) lead to further political change promoting RE sources.

3) The CDM has to be considered as an international regime. Regime theory provides us a good

starting point for analysing the effectiveness of the CDM. At the same time it shows some

critical deficits. Therefore, a three-dimensional governance approach was developed.

4) Interactions between the international, national and local level exist. The previous

chapters have shown that international regimes can penetrate the state to a high degree and

domestic politics shape international negotiations and national implementation at the same

time. Moreover, the local level bears potentials and barriers for international environmental

agreements. The following illustration summarizes the various ways of interaction.

International regime literature has focused on the interaction between the international and

the national sphere (a), concentrating on the meaning of national governments at the time of

negotiating an international regime. This paper argues that the local dimension (b and c) has to

be taken into account to measure effectiveness and interaction between all three dimensions

are relevant for exploring barriers and perspectives of the CDM to promote renewable energy in

developing countries. As the concept of multilevel governance reminds us and further research

has shown, a diversity of actors, institutions and decision-making processes have to be

considered in the field of climate change.253

253 See Annex 6 for a table on key actors, functions and tools at different scales of action in the field of climate change.

national

dimension

international

dimension

local

dimension (b)

(c)

domestic pressure

constraints during

ratification

voluntary action combined with binding regulations

no direct impact on policy translation

> Figure 3.4: Three Dimensions of Interactions


implementation review and voluntary action

disregarding local conditions

serving as a testing ground for experiments

opposing forces to national policies

learning from best practice

no direct link to

international level

+

-

Potentials (+) and barriers (-)

for effective outcomes:

top-down facilitation with incentives lack of national capacity

(a)



5) Political variables from all levels are expected to influence the effectiveness of the CDM.

As we expect interactions between all three dimensions we can now define our explaining

variables that affect effectiveness. However, we need to concentrate on the political

environment for potential variables. Economical and social framework conditions will be

mentioned, but they cannot be investigated here in depth. General rules and regulations of the

CDM regime form the international dimension and might affect regime effectiveness. Yet, these

rules will be excluded from a detailed research in this work, although their influence on the

process of implementation might be different in the Philippines, India and China.

Research on the implementation of environmental agreements and the CDM argue that the

political framework on the national level affects the effectiveness of the CDM. We will

therefore concentrate on national framework conditions:

We go beyond the pure potential for RE projects and concentrate on the structure of

the national energy sector, national policy to promote RE, the country’s environmental

performance and administrative capacity for the CDM including the DNA.

This thesis furthermore argues that also local political conditions matter especially for

successful and effective implementation of CDM projects on the ground.

This includes local capacity, the number of authorities involved, the transparency of

decision-making processes and corruption, interdependencies and interactions with the

national level as well as awareness for the CDM and potential RE project sites.

This thesis argues that national and sub-national political conditions matter and local political

factors are fundamental for the process of implementation. Eventually, a huge variety of indicators

can be investigated, but not all interactions and dependencies can be illustrated in this research.

Effectiveness of environmental agreements became the subject of increased analytical attention

over the last years as well as the impact of domestic factors on effective implementation.254 This

thesis will combine both fields of research. Two questions arise from this theoretical part:

1. Can the CDM be described as an effective global regime in the field of renewable

energy with effects going beyond concrete projects on the ground?

2. How do national and sub-national politics, policy and polity interact with the global

CDM regime and do they matter to promote the effectiveness of the CDM?

254 For an overview see VanDeveer, Stacy D. 2005.

> Figure 3.5: Independent and Dependent Variables of this Thesis


“domestic politics“

- host country’s RE potential - national energy sector - supportive national policy - environmental performance - national CDM infrastructure

- interplay with national level - local capacity and awareness - no. of authorities involved - corruption / transparency

further independent variables

- CDM rules and regulations - the global carbon market - political culture and values - economical / financial aspects - social environment

regime effectiveness

- overcome barriers for RE - promote sustainable development - lead to political change

?

These factors will not be examined in this thesis.



4 Domestic Politics: The Republic of the Philippines “In order to strengthen the mitigation programs/activities of the country, it is strongly recommended that we participate actively in the Clean Development Mechanism (CDM) of the Kyoto protocol, particularly small-scale CDM project activities on renewable energy and energy efficiency.”255

Located in the heart of Southeast Asia, “[t]he Philippines stands at the crossroads of the developed

western world and the Orient.”256 More than 7,000 islands, 300.000km2 with a population of more

than 90 million people and a gross domestic product (GDP) of almost 167 billion USD - that all is the

Republic of the Philippines.257 According to the 2005 Environmental Sustainability Index (ESI)258 the

Philippines belongs to the group of countries with low system score and moderate stress,

vulnerability, capacity, and stewardship. The Philippines ranks among the 15 “High Population

Density Countries.”259 Although it is not and cannot be this paper’s intention to recapitulate social

and political structures of the Philippines, it is necessary to give a short and to the topic of climate

change related introduction into regulations and the institutional framework for a later discussion

and assessment of results. This chapter also gives an insight into the Philippine energy sector, which

has to be considered with regard to the country’s CDM potential.

This case study will be divided into five sections: In a first part, an insight into the political

dimension of climate change will be given. A second part will then examine the domestic political

framework conditions in the field of renewable energy. The theoretical differentiation between

policy, polity and politics should be applied here. The situation and potential of the CDM in the

Philippines will then be discussed in a third section before a fourth part will examine four CDM

project activities in depth to draw conclusions based on experiences from project developers. A

fifth section finally represents a synthesis of this chapter.

4.1 The Political Dimension of Climate Change

With not even 1.3 percent of the world’s population, the Philippines accounts responsible for almost

0.3 percent of global CO2 emissions – an average of about one ton of CO2 per capita.260 Emissions

however increased radically in the past – in total from 43.9 million tons of CO2 in 1990 to 80.5

million tons in 2004 (at an annual increase of 5.9 percent). Per capita emissions increased

accordingly.261 The Philippines’ GHG emissions are nevertheless still way below global average. The

country has signed and ratified the Kyoto Protocol. As a non-Annex I Party to the Protocol, the

Philippines is not bound by specific targets for GHG emissions. This chapter will briefly summarize

255 Greenpeace 2005: p. 7. 256 IGES 2006: p. 9. 257 Data from the World Bank 2010: www.workdbank.org [retrieved: 12.2.2010]. See GDP (and population) in other countries for comparison. India: 1,217.5 billion USD (1,14 billion people), China: 4,326 billion USD (1,33 billion people), USA: 14,204.3 billion USD (304 million people) and Germany: 3,652.8 billion USD (82,1 million people) 258 Esty et al. 2005. See also Annex 8 and 9. The Philippines rank on position 125 out of 146 (total score of 42.3). 259 Countries are considered to be “High Population Density Countries” when more than half of the land area has reached a population density above 100 persons per square kilometre. 260 Source for data: UNDP 2007 (a). 261 UNDP 2007 (b) p. 311.

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the political dimension of climate change in the Philippines and discuss the questions to what

extend it is in the country’s interest to take action against global warming, implement a strong

climate-friendly legislation and cooperate with other actors, especially with regard to the CDM.

The ecosystem of the Philippines’ archipelago is among the richest worldwide and considered to be

a biodiversity hotspot (which means that it is among the world's biologically richest and most

threatened ecosystems). With numerous endemic species the Philippines are among the 17 so called

megadiversity countries of the world.262 Overuse, destructive exploitation of natural resources263

and extensive deforestation264 have caused serious and fundamental environmental problems that

heavily affect the local population.265 With a 32,400 km long coastal line and 70 percent of all

communities living along the coast, the Philippines266 is highly vulnerable to extreme weather

events such as flooding and typhoons that already increased over the last years.267 “Deforestation,

decimation of the coral reefs and fish stocks and high levels of air and water pollution result from

massive overexploitation, coupled with a lack of protection.”268 Deforestation and overexploitation

are also the two major environmental problems according to the Philippines’ Department of

Environment and Natural Resources (DENR).269 “Overall, declining stocks and reduced coverage and

quality have led to the failure of major ecosystems to provide a regular stream of economic goods

and ecological services.”270

The Philippines is already highly vulnerable to climate hazards and disasters. Frequent impacts of

typhoons and threats to the population of low-lying areas are growing rapidly.271 According to the

World Bank, the Philippines is already among the top 20 worldwide disaster hotspots.272

Germanwatch lists regular flooding and storms in the Philippines in its Global Climate Risk Index

2009.273 Furthermore, Greenpeace describes the Philippines as a “climate hotspot, vulnerable to

some of the worst manifestations of climate change.”274 Greenpeace therefore demands a stronger

promotion of RE sources:

“The Philippines’ critical vulnerability to the grave impacts of climate change will be among the country’s major challenges in the years, and even decades, to come. [...] While the government must anticipate and squarely face the worst of the impacts, it must above all choose an energy development path build on clean and renewable sources of energy [...].”275

262 Japan International Cooperation Agency (JICA) 2002: p. 37. 263 Broad R. / Cavanaxgh, J 1993. 264 See as references for the issue of deforestation: Kummer, David M. 1992: Deforestation in the Postwar Philippines, Ateneo de Manila University Press, Manila. / Top, Gerhard von den. 2003: The Social Dynamics of Deforestation in the Philippines. Nordic Institute of Asian Studies, Copenhagen. 265 Lawrence, K. 2002. 266 See Perez 1999: pp. 98ff. Furthermore, Greenpeace Southeast Asia predicts that a one-meter rise in sea level is projected to affect 16 regions, 64 out of 81 provinces and at least 703 out of 1.610 municipalities, inundating almost 700 million square meters of land and potentially displacing at least 1.5 million Filipinos (Greenpeace 2007: p. 11). 267 See Reese, N. 2007(b): p. 188ff. / Cruz et al. 2007, pp. 473ff. / Greenpeace 2007. According to the fourth IPCC Assessment Report the average temperature increase between 1971 and 2000 was about 0.14°C. In the future a further moderate increase compared to the global average in temperature is expected. At the same time, more heavy rainfalls and the chance for an accumulation of extreme weather events (drought, typhoons) will be likely. (IPCC 2007) 268 BMZ 2006. 269 See DENR 1999, pp. 8ff. and Arai, S. (editor) 2001; Serrano 2005, p. 35ff. 270 IGES 2006: p. 15. 271 See: The World Bank Hazard Management Unit 2006. 272 Dilley, Maxx et al. 2005. 273 Harmeling, S. 2008 (a) pp. 6f. The Philippines rank among the 10 countries most affected by extreme weather events between 1998 and 2007. 274 Greenpeace 2007: p. 4. As climate change publications and statements from Greenpeace are publicly accessible they represent a vital source for this part. Yet, Greenpeace is only one among many environmental NGOs in the Philippines. 275 Greenpeace 2007: p. 18.



Like most developing countries, the Philippines’ “adaptive capacity of human systems is low [while]

vulnerability is high”276 - due to geographical features, low level of economic development and

exposure exacerbated by poor access to resources.277

All these briefly enumerated facts reveal a high vulnerability of the Philippines to climate change

and the importance of this issue for the country. How far this leads to a strong political will for

action against climate change, for strong legislation and cooperation has to be investigated. The

issue itself has become a major political concern. High level authorities like the DOE, the DENR and

the Presidential Advisor on Climate Change and Global Warming are in a constant struggle for

competencies and develop new bureaucracy. In 2009 a Presidential Task Force on Climate Change

existed, a Climate Change Commission was on its way and the DENR discussed the creation of

Climate Change Offices.278 All this reflects the high awareness for climate change as a political

issue, while at the same time there is a lack of concrete action and technical expertise.

4.2 Domestic Politics and Renewable Energy in the Philippines

Environmental NGOs combine the issue of climate change with a demand for RE sources in order to

reduce GHG emissions in the Philippines. Greenpeace demonstrates a Sustainable Energy Outlook

for the country in which 60 percent of the Philippines’ energy needs will be covered by RE sources

energy in 2050. The report makes three fundamental policy recommendations:

“Implement a legally binding target for renewable energies, introduce a renewable energy legislation to enable investments in renewable energy technologies [and] provide strict and detailed regulations on how to implement renewable energy projects to minimize bureaucracy and avoid ambiguous interpretation for existing regulation.”279

This chapter will examine to what extend general barriers for RE projects in developing countries do

exist in the Philippines. The first part of this chapter will therefore investigate the three major

levels already mentioned above: The political (A), economical (B), and social (C) dimension.

4.2.1 Political and Socio-Economic Framework Conditions

(A) Political framework of the Philippines: The Philippines is a presidential republic280 with a

parliamentary system based on a constitution from 1987. The bicameral Congress (legislative

branch) consists of the House of Representatives (with 212 members representing the country’s

276 Greenpeace 2005: p. 4. 277 It is important to mention the difference between risk and vulnerability. Other costal areas might share the same risk of rising sea levels, but it will be the poor people in the developing world that are most affected and therefore most vulnerable. See UNDP 2007(b) pp. 78-80: “When tropical cyclones and floods strike Manila in the Philippines, they expose the whole city to risks. However, the vulnerabilities are concentrated in the over-crowded, makeshift homes of the slums along the banks of the Pasig River. […] Japan faces a higher exposure to risks associated with cyclones and flooding than the Philippines. Yet between 2000 and 2004, average fatalities amounted to 711 in the Philippines and only 66 in Japan.” 278 These Climate Change Offices should be implemented all over the Philippines and also be responsible for monitoring CDM projects. The workshop on that was held on 18-19 June 2009. DENR Undersecretary Sereng made clear, that the DENR has to “deal with political dynamics” and she was worried to get lost “in the organization of the Climate Change Commission.” She even said, that the ideas were “perfect” for her, but have to be simplified because “we have to consider that elections are coming up [and her] Secretary is running for office again.” 279 Greenpeace 2008: p. 5. 280 The president is both chief of state and head of government. He is elected for 6 years with no chance for re-election. However, current president Gloria Macapagal Arroyo already changed the constitution in 2005 for a second term.



districts and 24 sectoral party-list members; elected by popular vote to serve three-year terms) and

the Senate (24 members elected by popular vote to serve six-year terms).281 The U.S. Library of

Congress characterizes the Philippines as “unusual among developing countries in having a strong,

bicameral legislature.”282 Although free and democratic elections are held regularly, the country’s

economy and political systems are dominated by a few traditionally influential families.283 In this

political oligarchy, rather than democracy, key families rule economic and social structures.

Political parties do exist, but their power and competition in the political system is not comparable

to western democracies. Political parties only exist to support candidates in elections. Yet, a robust

system of checks and balances between President, Congress and Supreme Court has been

established.284 At the same time democratic governance is rare, almost no differentiation between

private and public interests is made and other problems like corruption and tax-evasion weaken the

state.285 “Widespread corruption and nepotism”286 are major and complex concerns in the

Philippines’ political system – also in the environmental sector and especially when it comes to

license the exploitation of natural resources.287 Filipino people themselves also show a lack of

awareness for democratic structures.288

(B) Economic framework of the Philippines: Related to political deficits are also economic

problems – with deficits in the public sector identified by the Asian Development Bank (ADB):

“Restoring financial health in the public power sector is needed for fiscal consolidation [as well as]

better cost-recovery and other reforms in all public corporations, and re-engineering of the

bureaucracy“289 Due to their previous moderate economic growth the Philippines were not as

affected as many other Asian countries by the Asian economic crisis in 1997 and reached a

sustainable economic growth of five to six percent per annum over the last years. Yet, the country’s

economy is still weak290 and poverty represents a major problem especially in rural areas and among

the Muslim population. About 50 million Filipinos (60 percent of the total population) live with less

than two USD a day, 19 percent are undernourished, one third of the population has no sufficient

access to water and 47.2 percent live without grid connected electricity.291 The Philippines’

economic growth since the 1950s has been less impressive than in many neighbouring countries. At

281 The House of Representatives consists of 212 members representing the country’s districts and 24 sectoral party-list members; elected by popular vote for three years; the Senate consists of 24 members elected by popular vote for six years. 282 U.S. Library of Congress: Government of the Philippines. (http://countrystudies.us/philippines/) [retrieved: 12.2.2010] 283 According to BMZ 2006, the 15 wealthiest families own more than half of all companies listed at the stock market. See also Kreuzer, P. 2007: pp. 2ff. and Croissant, A. 2002: pp. 120ff. 284 See Croissant, A. 2002: pp. 164ff. 285 See Reese, N. 2007(c): pp. 221ff. A Filipino proverb says: “The thief first steals and then runs, the Politicians first runs [for an office] and then steals.” (p. 224). 286 BMZ 2006 287 See Bankoff, G. 2007: pp. 166ff. /Lange, A. 2007: pp. 11f /Loewen, H. 2007, pp. 70ff. “Some blame the past and a history of colonialism that has never been completely effaced from the body politic of nation. The more radical accuse capitalism and the failure to realise proper ‘cultural consciousness’. Others blame culture, a tradition of gift-giving and reciprocity that places family and kinship above community and nationhood. Still others see poverty as the root of the cause of all evil, small salaries, and a bloated bureaucracy that promote graft and malfeasance as a survival strategy.” (Bankoff, G. 2007, p. 178) 288 According to a survey from 2004, almost 70 percent of the population does not care about who leads the country and still a majority states that the government can disregard public opinion if it is in the country’s interest (Panopio, I. 2004) 289 ADB 2004. Country economic review: Philippines. (www.adb.org/Documents/CERs/default.asp) [retrieved: 12.2.2010] 290 According to the “Medium-Term Philippine Development Plan” (National Economic Development Authority of the Philippines (NEDA) 2004) the economy grew at a respectable pace over the first years of the 21st century. The World Bank comes to the conclusion that despite these improvements „the Philippine economy continues to lag with lower levels of GDP growth and investment per capita, than for the region as a whole. Weak economic performance has constrained the country's ability to reduce poverty and meet other development objectives. “ (World Bank 2007 (a), p. 1) 291 Figures from Reese, N. 2007 (a): p. 54ff.

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the same time the Philippines “managed to escape the ‘Asian Crisis’ relatively unscathed”292 and

observed a period of economic progress in the 1990s – due to more political stability after the end

of Marcos’ regime in 1986, a fundamental shift to an export orientated economy and more foreign

direct investments.293 The country's economy is shaped by its growing electronics industry and the

service sector in the cities. Yet, agriculture and fisheries are the most important economic sectors,

although their share to the overall GDP is relatively low. “Around 40 percent of the population live

from subsistence agriculture, many in extreme poverty.”294 This divergence is also reflected in a

huge gap between the small number of rich people and the majority.295 The IPCC points out that

“the poor usually have a very low adaptive capacity due to their limited access to information,

technology and other capital assets which make them highly vulnerable to climate change.”296 This

already shows the link between the economic and social framework of the country.

(C) Social framework of the Philippines: The country struggles with poverty alleviation and

income inequality.297 There is almost no social mobility and the country is deeply divided - socially,

culturally and politically. At the end of World War II, the Philippines was one of the strongest Asian

countries (comparable to Japan) in Southeast Asia. After decades of dictatorship, a weak state, a

poorly evolved and mostly symbolic democracy along with personally orientated political elites a

fundamental lack of good governance structures can be observed today.298 The Philippines’

consistent economic growth goes along with a continuing population increase. More than 60 percent

of all Filipinos live in urban areas.299 The Human Development Index (HDI)300 which goes beyond GDP

to a broader definition of well-being, is at 0.751 for the Philippines, which ranks the country at 105

out of 182 countries (medium human development). Despite a relatively low GDP of 5,137 USD per

capita, the Philippines achieves a relatively high HDI compared to other developing countries.301

Civil society actors also have an impact on the national debate on climate change. Peter Kreuzer

briefly describes the Philippines as a country with “a broad and vocal civil society, free press and

repeated change political officers.”302 Since the end of Marcos’ rule (1972-1986), NGOs play a more

and more important role in providing climate relevant information and they use their new freedom

to actively advice and guide the government for climate legislation.303 Non-state actors are

292 Rodlauer et al. 2000: p. 1. 293 See Rodlauer et al. 2000: pp. 5ff. 294 Berié/ Kobert 2006, p. 387. 295 According to UNDP 2007(b) p. 282 the poorest 10 percent of the population share 2.2 percent of income, whereas the richest 10 percent share 34.2 percent (survey year 2003). 296 Cruz et al. 2007: p. 492. 297 See for economic constraints (also compared to neighbour countries): ADB 2007. 298 See Reese, N. 2007 (a): pp. 54ff. 299 See ADB 2007: p. 4 / Serrano, I. 2007: p. 288. 300 UNDP 2009. UNDP combines three dimensions (with various indicators) to calculate the HDI: “a long and healthy life” (life expectancy index), “knowledge” (education index) and “a decent standard of living” (GDP index). See for more detailed information: UNDP 2007: Technical Note 1. Calculating the Human Development Indices. (http://hdr.undp.org/en/media/HDR_20072008_EN_Technical1.pdf) [retrieved: 12.2.2010] 301 The HDI in Southeast Asian neighbouring countries is either lower (Indonesia: 0,734, Papua New Guinea: 0,541) or higher (Malaysia: 0.829, Singapore: 0.944) level of development. The Philippines have steadily increased its HDI since 1975 starting with 0.655. 302 Kreuzer, P. 2007: p. i (translation by the author). / See also Coronel, S. 2007. 303 Local staff from organizations like the WWF or Greenpeace advised the Philippines’ delegation at COP 14. Beyond this, local NGOs and grassroots campaigns use their resources and information on the ground. With 70.200 NGOs the Philippines have the highest number of NGOs per capita worldwide. (See Croissant, A. 2002: p. 125 and Wurfel 1991: pp. 215ff.) For the importance of NGOs in environmental debates see also Loewen 2005: pp. 15ff. and Serrano 2003: p. 103ff.

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traditionally important in the Philippines.304 They “play a significant catalyst role in sharpening

public awareness of how their situation is affected by such phenomenon as global warming [...]

unheard of in their lives a decade ago.”305 Yet, civil actors face similar problems like the political

system of the Philippines and they are not always free from political influence and corruption.

Journalists are also protected by the constitution. At the same time the Philippines is one of the

most dangerous countries for reporters.306 Finally, the Catholic Church has a huge influence on

social and political debates – including environmental topics.307 Although the country’s constitution

guaranties personal liberties and civil rights, the Philippines reality is still characterized by violent

political conflicts, human right violations and a neglect of fundamental civil rights.308

4.2.2 Potentials for Renewable Energy Sources in the Philippines

With a population of 90 million people, 50 percent of them living in rural areas, a growing energy

demand and still untapped RE resources, the Philippines has a great potential for CDM projects. Or

in other words: “Being an archipelago with abundant agricultural and renewable resources and

access to local and global technology, the Philippines have tremendous prospects and opportunities

for hosting CDM.”309 This chapter will summarize the potentials for RE projects in the Philippines.

Wind, hydro, and biomass are seen to have the most potential for being established as CDM

projects.310 We will moreover examine the potential of geothermal and solar power.

Potentials for wind power in the Philippines: In 2000, the Philippines’ Wind Energy Mapping

Project assessed the overall economic wind resources potential in the country and created a Wind

Energy Resource Atlas of the Philippines.311 This atlas provides site-specific information of the

country's wind power resources potential to help developers to initiate activities in either site-

specific resource development or wind power generation. The paper projected a total of 76,600 MW

wind energy resources potential in the country, with some areas capable of supporting wind farms

with capacities between 40 and 60MW and excellent wind resources for village power applications -

particularly in the northern and central regions of the Philippines.312

Potentials for hydropower in the Philippines: “Hydropower is considered a conventional energy

source in the Philippines.”313 This is not much surprising in a tropical monsoon region country with

an average rainfall of 2,360 mm, 421 principal rivers, drainage areas ranging from 40 to 25,500

square kilometres and other physical and topographical characteristics that indicate a high potential

304 For literature dealing with NGOs in the Philippines see: Clarke, G. 1998 / Alegre, A. 1996 / Bryant, R. 2005. 305 Arai, S. (editor) 2001: p. 5. 306 Since 1986 more than 112 journalists were killed because of political reason. Most of them investigated corruption on the local level. Very few cases have been brought onto court (Bück, P. 2007: pp. 287ff.). 307 See Zabel, D. 2007. 308 For deficits in the human rights sector see Croissant, A. 2002: pp. 187ff. Hedman/Sidel 2000 pp. 36ff. draw a historical picture on morbid symptoms and political violence in the Philippines. 309 IGES 2006: p. 39. 310 See IGES 2006: pp. 47ff. 311 Elliot, D. 2000. 312 To attract private sector investors, the government launched the first wind-power investment kit in June 2004, which highlights the various opportunities for developing 16 wind power areas with a total capacity of 345 MW. 313 IGES 2006: pp. 50ff.



for electricity generation from water resources.314 Larger hydropower projects (above 50MW) are

normally grid-connected, micro-hydros (up to 100kW) are basically community-based and pico-

hydros (below 1 kW) serve only one or two households. Despite large potentials, hydropower

development has slowed down over the last years. However, due to higher power demand more

development initiatives are expected.

Biomass potentials in the Philippines: An extensive agriculture, livestock and forestry industries

lead to an extensive generation of biomass resources.315 The overall biomass supply potential was

estimated in 1997 to be equivalent to 131 million barrels of fuel oil equivalent (MMBFOE) and was

assumed to grow to 301.5 MMBFOE in 2008. This is both an opportunity for the country’s electricity

generation and a threat to the environment. “If not utilized properly, biomass wastes are either

burned in open fields or simply left to rot in open spaces, or dumped along roadways and

waterways, polluting rivers and streams in the process.”316 Available technologies (especially for

electricity generation or the use of biogas for energy heating) can be applied to use these resources

in a more environmentally sound manner. New developments in rice hull power co-generation

technologies for example are considered to have potentials for projects under the CDM.317

Solar energy potentials in the Philippines: Located just above the equator the Philippines bear a

vast potential for energy from the sun, although typhoons, rainy seasons and changing weather

patterns are concerns for solar power developments. Yet, photovoltaic bears the potential to

overcome barriers in energy supply for remote and rural areas, such as high costs extending power

transmission and distribution lines as well as the difficulty of transporting fuel for diesel generators

to remote areas. An example of solar energy application is the Cagayan Electric Power and Light

Company Solar Photovoltaic-Bubunawan Project in north-central Mindanao. In 2006 the solar

photovoltaic power plant was the largest of its kind in the developing world.318

Potential for geothermal power production in the Philippines: Filipino engineers and scientists

have developed local expertise to exploit geothermal resources, as well as in development and

power generation. The reason can be found in the country’s high potential of geothermal

resources.319 “The Philippines is a world leader in harnessing geothermal energy from ‘wet’ steam

fields, the predominant geothermal resource worldwide.”320

Eventually, a potential for the development and deployment of all RE sources can be observed in

the Philippines. To what extend these potentials lead to numerous RE CDM projects should be

evaluated later on. Greenpeace however claims a governmental commitment to increase the share

of RE sources in the energy mix and provide strong and supportive legislation as well as clear and

binding target, a priority access to the grid for renewable power generators and the stop for the

construction of coal-fired power plants.

314 IGES 2006 identifies 436 potential micro-hydro sites with an estimated 28MW capacity. 315 Contributors are fuelwood, bagasse, coconut residues, rice hull, animal waste, and municipal solid waste. 316 IGES 2006: p. 52. 317 At the same time further developments such as an increasing palm-oil industry have to be considered. These mostly export-orientated activities are supported by the Philippines’ Department of Agriculture with financial incentives. Source: Agriculture Philippines: Philippines Developing Palm Oil Industry. 26.6.2009 (www.agriculture-ph.com/2009/06/philippines-developing-palm-oil.html) [retrieved: 12.2.2010]. 318 IGES 2006: pp. 56f. 319 IGES 2006 states studies indicating that the country has 2,047 MW of proven reserves and 4,790 MW of potential reserves. 320 IGES 2006: p. 57.

http://www.agriculture-ph.com/2009/06/philippines-developing-palm-oil.html

http://www.agriculture-ph.com/2009/06/philippines-developing-palm-oil.html



“While it is true that the Philippines faces many challenges in the formulation of its energy policy for the coming years – security of energy supply, economic growth, climate change and sustainable development, employment and technological development - these issues can be successfully addressed by a strategic approach to the development of the country's new renewable energy resources.”321

In line with the country’s energy development objectives, indigenous energy resources are given

priority focus. Due to the geographical conditions of the country NGOs like Greenpeace demand a

decentralized and community based development approach to promote RE, meet the people’s

energy needs and empower societies at the same time. Although RE sources are widely used in rural

areas in the Philippines they often cannot be considered as climate-friendly:

“Currently, much of the Philippines’ rural energy requirements are met by kerosene lanterns and inefficient, smoky stoves which are damaging to health. [...] Biomass [such as firewood], used almost entirely for cooking, as well as geothermal and hydro power [...] are the currently used renewable energy sources.”322

Greenpeace aims to stabilize CO2 emissions in the Philippines by 2010. This would need a shift in

rural electrification, heating and cooking as well as an increase of RE. Before investigating the

CDM’s potential to support this goal the following chapters will examine the energy sector in the

Philippines as well as political structures, laws and regulations relevant for RE sources.

4.2.3 The Energy Sector: Laws and Regulations (Policy) in the Philippines323

“The energy situation in the country is directly relevant for any CDM project initiative.”324 This

section will therefore have a brief look at the energy sector mainly based on information from the

UNDP and the Philippine Energy Plan developed by the Philippine Department of Energy (DOE).325

Laws and regulations relevant for RE sources will be also introduced.

As a rapid population growth and robust economic development326 is expected for the next years,

energy demands will also increase in the Philippines. For 2004 an electricity consumption of 677

kWh per capita was measured – an increase of 68.8 percent compared to 1990. 16.2 million people

still lived without any electricity supply in 2005.327 Whereas the use of coal and natural gas has

increased, the amount of biomass and oil shows a decrease. The share of RE at the overall energy

production remained almost unchanged and is dominated by geothermal projects.328 The Philippines

still completely resign nuclear energy.329 The country’s energy mix shows a high dependency on

fossil fuels. This trend is even expected to increase to a share of 62 percent of fossil fuels until

2013.330 On the other hand, the Philippines already has a wide mix of RE sources (as shown in Annex

11 of this work). But while the use of these non-fossil fuels is predicted to grow, the projected

321 Greenpeace 2007: p. 17. 322 Greenpeace 2008: pp. 4-7. 323 Findings in this chapter are mainly based on research with the help of the IEA Global Renewable Energy Database and the Philippine Energy Plan 2004-2013. 324 IGES 2006: p. 16. 325 Department of Energy of the Philippines (DOE) 2004. 326 UNDP 2007(b) p. 244 estimates a population growth from 84.6 to 101.1 million people. 327 UNDP 2007(b) p. 303. 328 See Annex 11 for details. According to UNDP 2007, p. 361: 26,2 MMBOFE in 1990 and 44,7 MMBOFE in 2005. 329 “The use of nuclear energy in the Philippines has seen its light and death in the Bataan Nuclear Power Plant project which was considered one of the major sources of graft attributed to President Marcos and his cronies. The fact that the Philippines government lost billons of dollars in this single project and continues to pay its contracted debt, not to mention the questionable design and overall structural integrity of the plant gave nuclear energy a bad name.” (Garcia, J. 1998: p. 7). 330 This paragraph according to: Department of Energy of the Philippines (DOE) 2004.



expansion is short due to higher demand growth. Local efforts to promote indigenous energy

development (expected to result in a 5.2 percent growth per year) will be insufficient in volume to

cover the growing energy demand. By 2013, the DOE expects indigenous energy to reach a share of

58 percent and projects “a rising share of fossil fuel contribution to the energy mix. Most of these

increases will come from imported sources, with oil as the dominant fuel.”331

So what does the legislation for RE look like? Research with IEA’s Global Renewable Energy Database

leads to nine results332: from the promotion of geothermal energy in 1978 and a program to support

RE in 1997 to the Renewable Energy Law from December 2008. Regulation and investment

incentives were already a main focus of the Geothermal Energy Law from 1978. This law guarantees

tax exemption and a better access for foreign experts in this area.333 Similar incentives are given to

hydro energy since 1991 by the Mini-Hydro Law that also guarantees tax exemption and an easier

import of machines and material into the Philippines from abroad.334 An executive order from 1997

then aims to promote various RE sources, but without any precise goals or binding targets:

“The policy aims to […] accelerate the exploration, development, utilization and commercialization of ocean, solar, and wind (OSW) energy resources which are indigenous, renewable, environment-friendly and of such abundance that can provide the Philippines self-sufficiency in energy and possibly surpluses for export in the future despite high energy demand due to rapid economic growth […].”335

Similar aims to provide electricity for the whole population and to establish an independent

regulatory authority for the energy sector are formulated in another order from 2001.336 According

to that regulatory instrument social and environmental aspects have to be considered in every

energy project. RE sources are also seen as an important field for investments

“The exploration and development of indigenous and renewable energy sources and technologies are the major areas which the government is aggressively promoting for investments under the 2002 Investment Priorities Plan (IPP).”337

The Biofuels Act from 2007 regulates the graduated addition of biofuels and bioethanol to

conventional fuel.338 Finally, the Renewable Energy Law from 2008 translates the general aims and

ambitions of the Philippines’ government to promote renewables into concrete action:

“The Renewable Energy law aims to accelerate the exploration and development of renewable energy resources as well as to increase the utilisation of renewable energy by institutionalising the development of national and local capabilities in the use of renewable energy systems, and promoting its efficient and cost-effective commercial application by providing fiscal and non-fiscal incentives. […] The new law provides a seven-year income tax holiday and tax exemptions for the carbon credits generated from renewable energy sources. A 10% corporate income tax, as against the regular 30%, is also provided once the income tax holiday expires. Renewable energy facilities will also be given a 1.5% realty tax cap on original cost of equipment and facilities […].”339

The Renewable Energy Law sets a defined proportion of renewable energy at the power suppliers’

energy mix. Positive incentives with regard to taxation are also part of the law. Beyond this law the

Philippines have declared a national Energy Plan that aims to expand power service to remote

331 IGES 2006: p. 20. 332 International Energy Agency (IEA) 2009. See Annex 10 of this paper for an overview. 333 Presidential Decree No. 1442: „An Act to Promote the Exploration and Development of Geothermal Resources“ 334 Republic Act No. 7156: “Mini-Hydro Law” 335 Executive Order 462: “New and Renewable Energy Programme” (www.doe.gov.ph/downloads/EO%20462.pdf) 336 Republic Act No. 9136; “An Act Ordaining Reforms In The Electric Power Industry, Amending For The Purpose Certain Laws And For Other Purposes” 2001 (www.doe.gov.ph/popup/RA%209136.pdf) [retrieved: 12.2.2010] 337 “Investment Priorities Plan” 2002 (www.us-asean.org/Philippines/2004_IPP.pdf) [retrieved: 12.2.2010] 338 Biofuels Act 2007 (www.doe.gov.ph/AF/Biofuels.htm) [retrieved: 28.1.2010] 339 Renewable Energy Act 2008 (www.senate.gov.ph/lis/bill_res.aspx?congress=14&q=SBN-2046) [retrieved: 12.2.2010]

http://www.doe.gov.ph/downloads/EO%20462.pdf

http://www.doe.gov.ph/popup/RA%209136.pdf

http://www.us-asean.org/Philippines/2004_IPP.pdf

http://www.doe.gov.ph/AF/Biofuels.htm

http://www.senate.gov.ph/lis/bill_res.aspx?congress=14&q=SBN-2046



communities and marginal areas with limited demand density. Its implementation has four major

objectives340: 1) ensure sufficient, stable, secure, accessible and reasonably priced energy supply;

2) promote RE and clean energy technologies; 3) cultivate partnerships with and among partners

and stakeholders and 4) empower and balance the interests of energy stakeholders.

All this leads to a diverse role of RE sources in the Philippines. Obviously, the national government

is willing to use the country’s high RE potential to minimize energy dependencies and guarantee

energy supply for further economic growth. Almost all kinds of RE sources from wind to geothermal

have huge potentials in the Philippines. At the same time, RE sources make only little progress in

the Philippines. Before discussing the question if the CDM bears the potential to change this

situation, we will first have a glance at the various actors involved in decision making processes.

4.2.4 Promoting Renewable Energy: Actors (Polity) and Processes (Politics)

The fundamental actors and procedures for political decisions originate from the constitution of the

Philippines in 1987.341 It establishes the Philippines as a “democratic and republican State”, where

“sovereignty resides in the people and all government authority emanates from them.”342

Consistent with the doctrine of separation of powers, the powers of the national government are

exercised by the executive, legislative and judicial branches.343 The most relevant institution in the

energy sector of the Philippines is the national Department of Energy (DOE). According to a member

of the House Committee on Energy this is also true for RE sources, as the DOE “shall be the sole and

exclusive authority responsible for the promotion, administration and regulation of the renewable

energy resources.”344 Since 1992 it is responsible for laws, regulations and future energy plans of

the country, including the legislation and political instruments for RE sources:

„[The DOE] shall prepare, integrate, coordinate, supervise, and control all plans, programs, projects, and activities of the Government relative to energy exploration, development, utilization, distribution, and conservation.“345

Since 2002, the Electric Power Industry Management Bureau (EPIMB) under the DOE works on

reforms and strategies for the national energy sector. The Energy Regulatory Commission (ERC) - an

independent, quasi-judicial regulatory body - should monitor compliance with laws and regulations,

promote consumer interests, encourage market development and promote competition. Yet,

concerns about its potential to promote RE were raised in an ADB meeting.346

340 Department of Energy of the Philippines (DOE) 2004. 341 References are from the Philippines’ Constitution (Saligang Batas ng Pilipinas). See: Government of the Philippines 1987. 342 Government of the Philippines 1987 (Section 1, Article II). 343 The executive branch is headed by the President, the legislative branch is composed of the Congress and the judicial branch with the Supreme Court occupying the highest tier of the judiciary. (For further information: Cruz, Isagani 1995: The Nature of the Constitution. Constitutional Law. Philippines: Central Lawbook Publishing Co., Inc.). It is the two-chamber Congress with the Senate and the House of Representatives, which enacts the laws, subject to the veto power of the President which may be overturned by a two-thirds vote of Congress (Section 27(1), Article VI). The President has the constitutional duty to ensure the faithful execution of the laws (Section 17, Article VII), while the courts are granted the power of judicial review (Section 1, Article VIII). 344 Honorable Augusto H. Baculio 2005: The Philippine Renewable Energy Policy and Updates. (serd.ait.ac.th/cogen/62/events/bangkok_nov05/other_presentations/baculio_philippines_policy.pdf) [retrieved: 12.2.2010] 345 “An Act Creating the Department of Energy's Rationale for the Organization and Functions of Government Agencies Related to Energy and Other Related Purposes”, No. 7638; 1992 (doe.gov.ph/popup/RA%207638.pdf) [retrieved: 12.2.2010] 346 A lecture on the ERC was held by its chairperson Zenaida G. Cruz-Ducut on 18 June 2009 at the 4th Asia Clean Energy Forum in Manila, where she said that the ERC will harmonize all existing rules and regulations to ensure effective

http://www.serd.ait.ac.th/cogen/62/events/bangkok_nov05/other_presentations/baculio_philippines_policy.pdf

http://www.doe.gov.ph/popup/RA%207638.pdf



Energy legislation is formulated on the national level, whereas the implementation of concrete

projects on the ground depends on various private and political actors on the local level. The

constitution of the Philippines gives limited political autonomy to local government units (LGUs)

that act as the municipal governments for provinces, cities, municipalities, and – the smallest

political unit - barangays.347 The Philippines is divided into a hierarchy of local government units

with the province as the primary unit.348 As of 2007, there are 81 provinces in the country. They are

further subdivided into 1.610 cities and municipalities, which are in turn, composed of about 42.000

barangays, headed by a barangay captain. Local governments are subordinated to the central

national government. However, their influence needs to be considered when it comes to the

implementation of RE CDM projects.

The energy sector is regulated by the national DOE; LGUs are the political authorities on the

ground. In addition to that, private actors and enterprises are often responsible for the

implementation of any kind of energy power project. Pro-private-market regulations have started a

process of restructuring the energy industry into an efficient enterprise - not without criticism:

“It is based largely on perceptions and unfounded beliefs rather than reality and meaningful analysis. This could result in the obfuscation of real challenges confronting the Philippine electricity industry and preclude consideration of meaningful alternatives to improve industry performance.”349

The reform of the energy sector was initiated on June 26th 2001 with the Electric Power Industry

Reform Act (EPIRA).350 This law should gradually change the energy market of the Philippines: The

electricity network and existing power plants are sold to private investors; new ones will be

constructed by private actors. The electricity reform leads to a high degree of privatization.351

Finally, the role of non-state actors remains unclear. As it was described earlier, NGOs do play a

vital role in the political system of the Philippines, they also do their part in the area of RE sources.

Organizations like Greenpeace advocate RE laws and provide information for decision makers.352

NGOs like the Renewable Energy Coalition are also directly involved in law-making processes:

“It took 18 years to pass the Renewable Energy Law. In 2006 we became very active during a window of opportunity due to climate change and the high oil prize. In 2007 the churches get involved [...] The law provides subsidies, tax incentives and brings down the costs for renewables and not a single legislator voted against it. [...] NGOs have a strong power and influence in the senate and their work is not finished yet, as they will continue to support senators. [...] I see a good understanding for the law in the government. However, the government alone was not able to make it happen.”353

Yet, any general impact of NGOs on decision-making and legislation remains hard to define as there

are no legalised political structures and procedures for the participation of non-state-actors. Yet,

the role of NGOs and private actors shows how actors and decision-making processes, polity and

politics are interlinked with each other on the national level. This system becomes even more

implementation of renewable energy. However, the ERC was then accused not to be independent and transparent. Delays in the processes as well as interference with political level were criticised. 347 See Government of the Philippines 1987 (Section 1, Article X). 348 Republic Act No. 7160: The Local Government Code of 1991 (www.chanrobles.com/localgov.htm) [retrieved: 12.2.2010] 349 Sharma, D. et al. 2003. 350 Republic Act 9136, the “Implementation Rules and Procedures” entered into force in March 2002. 351 Sharma, D. et al. 2003. 352 Greenpeace 2008 (a). 353 Catherine Paredes Maceba, spokesperson of the “Renewable Energy Coalition” sees the enforcement and implementation of the Renewable Energy Act in 2008 after 18 years of negotiation as a success for her organization and her work as a lobbyist. (Interview with Maceba, 17.6.2009)

http://www.chanrobles.com/localgov.htm



complex and more actors get involved on the local level. Corruption, lobbyism and political

oppression lead to non-transparent decisions and make it hard to define key-actors in RE legislation.

4.3 Implementing the CDM in the Philippines

CDM projects promoting renewables involve additional political actors apart from the DOE.

Environmental legislation in the Philippines is comprehensive and extensive, not only in the energy

sector, but also in the field of climate change.354 A crucial barrier to stronger policy outcomes is the

unclear distribution of responsibilities. Changing administrative responsibilities and the creation of

new institutions have negative impacts on the implementation of ambitious plans to fight climate

change.355 The Wildlife Resources Conservation Act, the Clean Air Act, the Ecological Solid Waste

Management Act, the Toxic and Hazardous Waste Management Act and the Clean Water Act are

only some examples for the government’s environmental efforts.

“However, while some of these policies are beginning to have a positive impact, for the most part issues relating to inadequate resource allocation and weak institutional capacity and governance, are undermining effective implementation and compliance.”356

This is fundamental for the effectiveness of the CDM. The World Bank identifies two major

challenges for the DENR: improving credibility and transparency on the one hand and rationalizing

functions and expenditures to improve the quality of the DENR’s service delivery on the other hand.

Although the DENR has developed a Rationalization Plan as part of a government-wide initiative,

“the challenge lies in having it effectively implemented.”357 According to the World Bank the

institutional weakness of the DENR is reflected in the severely constrained budget of the

department: “Some 85% of DENR’s budget goes to maintaining the bureaucracy and personnel costs,

leaving little for its operations.”358 Uwe Scholz from the German development agency GTZ makes a

similar observation. GTZ aims to implement Climate Change Offices to strengthen the power of

technical experts in the field of climate change, but faces severe barriers:

“Implementing political change in the Philippines is always very hard. Everything needs an executive order from the minister. There are outstanding conditions in the Philippines with regard to the number of technical experts in the country. 24.000 employees work alone in the DENR. Yet, in the bureaucracy are many units of organization with directors and officials, but only very few technical experts that can for example assist project developers. This is especially true for the field of climate change.”359

4.3.1 Changing the Political Environment: New Authorities and Regulations

In chapter 4.2.2 we have described the high potential of RE sources in the Philippines. Consequently

the country’s CDM potential should be high and various options for projects exist. This chapter will

examine to what extend the CDM has changed the political landscape to realize these potentials. As

the introductory chapter about the CDM (chapter 2.3) has revealed, a strong institutional framework

is a fundamental prerequisite for CDM projects in developing countries and can be seen as a sine

354 E.g. the National Action Plan on Climate Change. that has not been implemented into developing plans so far. 355 Interview with Scholz, Uwe (19.6.2009). 356 World Bank 2007(a) p. 1. 357 World Bank 2007(a) p. 2. 358 World Bank 2007(a) p. 2. 359 Interview with Scholz, Uwe (19.6.2009).



qua non for a successful implementation and development of the CDM. All CDM projects are subject

to national environmental law and regulations. Therefore, this chapter presents the relevant

legislation and the institutional framework in the Philippines.

Climate change is a high level political issue in the Philippines. According to the constitution the

government and the President in specific have a strong role with regard to natural resources.360 Very

early in the process of international climate negotiations, the Philippines established an Inter-

Agency Committee on Climate Change (IACCC)361 to coordinate various climate change related

activities, to prepare the Philippines’ position to the UNFCCC negotiations and to propose climate

change policies. The IACCC also submitted the Philippines’ Initial National Communication on

Climate Change to the UNFCCC. “At present, it also undertakes the review, evaluation, and

endorsement of project proposals for funding.”362

On June 25th 2004, the DENR became the designated national CDM authority (DNA), responsible for

the CDM Eligibility and Approval Criteria as shown in Annex 12. It is designed as a “two-tiered

agency with an approval body at the top and a secretariat in charge of day-to-day activities.”363 This

structure, involves a bureaucracy able to impede the approval process, but it might have

disadvantages compared to a simplified government-independent DNA. The DNA formulates a

national CDM policy, develops the criteria and standards for the review of potential CDM projects,

assesses and approves CDM activities and monitors their implementation. The DENR is “the deciding

authority in approving or rejecting projects.”364

The department also promotes capacity building with CDM handbooks and other publications,

workshops and seminars to expand knowledge about the CDM all over the Philippines.365 The DNA is

comprised of a steering committee, a secretariat, and three technical evaluation committees which

are responsible for evaluating whether or not proposed projects meet the national approval criteria.

NGOs and other actors from the private sector are involved in the project approval process as part

of the steering committee.366 Other governmental institutions support the DNA approval process:

The DOE, the National Solid Waste Management Commission (NSWMC), the Forest Management

Bureau (FMB) and the Department of Science and Technology (DOST).367

360 Article XII, Section 2: “All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy [...] are owned by the State. […] The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The President may enter into agreements with foreign-owned corporations involving either technical or financial assistance for large-scale exploration, development, and utilization of minerals, petroleum and other mineral oils according to the general terms and conditions provided by law.” 361 Philippines Administrative Order No. 220 (8.5.1991). 362 IGES 2006: p. 65. 363 Silayan, A. 2005: p. 27. 364 IGES 2006: p. 66. 365 Philippines DNA 2008. 366 For the organisational structure of CDM related government authorities see IGES 2006: p. 65ff. 367 The DOE was created by Republic Act 7638 in 1992. Its mandate is to prepare, integrate, coordinate, supervise, and control all plans, programs, and activities of the government relative to exploration, development, utilization, distribution, and conservation. The DOE’s mission is to “improve the quality of life of the Filipino by formulating and implementing policies and programs to ensure sustainable, stable, secure, sufficient, accessible and reasonably priced energy.” The NSWMC is the major agency tasked to implement Republic Act 9003, the Ecological Solid Waste Management Act of 2000. This law calls for the institutionalization of a national program to manage the control, transfer, transport, processing, and disposal of solid waste in the country. The NSWMC’s mandate is to prescribe policies to effectively oversee the implementation of appropriate solid waste management plans by end-users and local governments, as mandated by law. The FMB is an agency of the DENR that provides support for the effective protection, development, occupancy management, and conservation of forest lands and watersheds. It collaborates with international and local development organizations in several forestry development programs.



4.3.2 Implementation Rules and Procedures

The Philippines’ government recognizes the potential and the benefits of the CDM for the country.

It strongly promotes the implementation of the mechanism and sets political guidelines: The

national government discharges its task to implement SD criteria appropriate to local conditions and

aims to make the overall approval process “transparent, participatory, credible, efficient, and

effective.”368 Projects must be implemented in a responsive manner in accordance with the project

proponents, the government, the local population and various stakeholders. In order to be issued a

Letter of Approval by the DNA, project developers must fulfil a wide range of criteria and take care

of the environmental, economic and social dimension of sustainable development.369

The government of the Philippines acknowledges SD benefits from CDM projects as a key factor. Not

only on a general level it is seen as a “valuable tool for host countries used to evaluate key linkages

between national development goals and CDM projects” 370, but SD criteria are also vital for the

local level in the Philippines. When applied to the country’s environment and natural resources

sector, SD represents “the wise use and allocation of environmental resources to support the

socioeconomic development needs of present and future generations.”371 To assess SD benefits, the

Philippines have taken a pragmatic focus on immediate development criteria related to the three

dimensions of SD. Project evaluation indicators are also used in certain CDM issue areas.

The previous chapter has shown that a number of governmental institutions are involved in the CDM

procedures as shown in Annex 11. But this does not necessarily lead to a long processing time. If no

revisions have to be made, the whole approval process takes 15 to 20 working days for small and 20

to 25 working days for large scale projects according to the DNA.372 All this reflects the general

implementation rules and procedures of the CDM and shows that the Philippines have build up a

strong and complex CDM framework. The next chapter will now have a look at its output with an

overview on RE CDM project activities in the Philippines.

4.3.3 Renewable Energy Project Activities in the Philippines

At the end of December 2009 about 70 CDM projects were approved by the Philippines’ DNA and 44

projects were registered at the CDM Executive Board of the UNFCCC. This is equal to about two

percent of worldwide CDM activities.373 Most of them were RE projects: alone 32 biogas projects

(animal waste and waste water treatment), but only one geothermal, one hydro and one wind

The DOST’s mandated is to provide central direction, leadership, and coordination of all science and technology activities in the country and to formulate science and technology policies, programs, and projects in support of national development priorities. The DOST earned cabinet rank in 1987. 368 IGES 2006: p. 69. 369 IGES 2006: p. 70: The economic dimension of SD involves the provision of livelihood and other economic opportunities, safety nets and compensatory measures, promoting the use of cleaner, more efficient, environmentally friendly technologies and providing new and additional financial resources. The environmental dimension involves compliance with environmental policies and standards, improvement of local environmental quality and promotion of the sustainable use of natural resources. The social dimension involves providing education and training to build local capacity, providing vulnerable groups access to local resources and services and promoting local participation. 370 IGES 2006: p. 43. 371 IGES 2006: p. 44. 372 See IGES 2006: p. 72. 373 According to the UNFCCC CDM Database: http://cdm.unfccc.int/Projects/projsearch.html [retrieved: 12.2.2010]

http://cdm.unfccc.int/Projects/projsearch.html



power project were approved. 25 RE CDM projects were registered at the time of writing. To

evaluate the CDM’s potential to promote SD and overcome barriers for RE technologies this chapter

will focus on the barriers that were identified by the project proponents as well as the projects

commitment to the SD criteria issued by the DNA.

According to a DENR Administrative Order project developers must possess the legal capacity to

participate in the proposed CDM project activity and contribute to the economic, environmental and

social dimension of SD.374 The following analysis is based on the Project Design Documents (PDDs)375

from all RE CDM projects that were registered in December 2009. Results from that, the political

framework conditions and the general situation of RE in the Philippines will eventually provide a

broad perspective for a final evaluation to discuss the effectiveness of the CDM in terms of our key

indicators: promoting RE sources, foster sustainable development and lead to change in the political

landscape of the host country. Annex 13 provides a list of the project sample.

Every project has to present a detailed “barrier analysis” at registration where additionality needs

to be proven, meaning that the activity would not have been possible without the additional

incentives of the CDM. The following analysis will investigate the Philippines’ projects in the sectors

of biogas (1), biomass (2), geothermal (3), hydro power (4) and wind energy (5). Projects dealing

with solar energy or photovoltaic are neither registered nor at validation yet. Except for two, all

projects are small scale projects, restricted to 15 MW installed capacity according to CDM

regulations. It has to be made clear that the few projects are not representative for the developing

world. It does not include projects that were rejected and only gives an overview on RE projects

that were successfully realized through the CDM and consequently have to describe the mechanism

as the prerequisite to realize the project activity.

(1) 18 biogas CDM project activities in the Philippines: Alone 18 biogas CDM projects were

registered in December 2009 – most of them in Luzon. 14 were implemented by the same project

proponent and all of them used waste and disposal from swine farms to produce energy: Methane

from organic material which would otherwise escape into the atmosphere is caught from the

existing waste water ponds for power production. Methane has a higher global warming potential

compared to CO2 and its reduction is therefore financially more attractive than other RE projects.

The project proponent learned from experience in a pilot project from 1999 long before the CDM

was initiated. Another project extracts Methane from a waste disposal facility. This will be

examined as one of the four case studies later on. A further project collects waste products from

the ethanol production to use its energy for powering the distillery. All these projects encounter

various barriers: The most significant ones are unfamiliarity with new technologies, “perceived risk

of the technology and the relative lack of investment interest among the key business

constituency.”376 Because the government promotes RE less than conventional energy sources for

power production, projects in this field are hard to finance. Investors and banks are already highly

sceptical due to uncommon practise and a lack of experience with these projects. According to the

374 The DENR Administrative Order No. 2005-17 prescribes the CDM approval criteria, which ca can be found in Annex 12. 375 The PDD is the initial document to get approved as a CDM project by the CDM EB. Every project participant needs to assess barriers to prove additionality and outline SD benefits. The official form of the UNFCCC is provided in Annex 7. 376 PDD of the CDM project: http://cdm.unfccc.int/Projects/DB/DNV-CUK1182371163.4/view [retrieved 12.02.2010]

http://cdm.unfccc.int/Projects/DB/DNV-CUK1182371163.4/view



PDDs a potential surplus of bio energy cannot be fed in easily into the existing power grid. This is

why CERs are fundamental for the project implementation. The project developer Philippines

BioScience Corporation (PhilBio) always quotes the denial of a specific investment bank:

„Our unit is not yet in a position to finance small scale RE project, and in particular biogas projects that PhilBIO is currently developing in the countryside […]. Such projects, on a stand alone are often seen as potentially risky.”377

A lack of understanding and confidence with the implementation of new technologies represents a

major barrier as well as the requirement of knowledge transfer and training. Additional

technologies are also not worth any investment as e.g. sewage treatment is not mandatory by law

and there are no national standards implemented yet. RE projects also face political bias and do not

have access to government financial guarantees like conventional energy. Consequently, all project

proponents conclude that they would have failed without the CDM under prevailing conditions.

(2) Three further biomass CDM project activities: Two of the three biomass CDM projects in the

Philippines generate power from bagasse of sugar cane. One of them in Luzon, another one in San

Carlos at the east coast of Negros Occidental which is among the case studies and will be discussed

in detail in chapter 4.4.4. In both projects the generated energy is used not only for heating the

ethanol distillery but also for the power grid. A third project uses rice husks as the primary fuel for

heat generation. A crucial barrier for the project participants is a lack of support for biomass:

“[T]here are no direct programs, regulations or initiatives that are mandatory, requiring the generation or use of renewable electricity from biomass, that would be applicable to the San Carlos Renewable Energy project.”378

The lack of political incentives is also criticised in another PDD:

“The low share of non-conventional renewable power producers, the high leverage of conventional power generators and the insufficient incentives provided by the Philippine Energy Bill deter the implementation of renewable energy sources and place the non-conventional renewable power producers in a disadvantaged position. [T]here is a lack of appreciation of the multiple benefits of decentralizing and diversifying energy supplies, which leaves the considerable potential for developing micro power plants in the southern regions of the country unexploited.”379

Energy generation from sugar cane distilleries is not common in the Philippines, although it has a

huge potential to satisfy energy demand with already existing renewable material. In addition to

that, training and education were claimed to be necessary and increase costs. Finally, even the

development bank of the Philippines guaranteed financial support for several projects only under

the condition that they will be approved under the CDM.

(3) A single hydro power project registered in the Philippines: Despite the fact that hydro energy

is considered to be a conventional energy source in the Philippines, only one hydro power project is

registered under the CDM so far. Two turbine-driven hydroelectric power plants with capacities of

16,5MW and 26 MW run under the CDM. Their connection to the grid should substitute fossil fuel

power plants. Despite good natural conditions it represents the first hydro power project in

Mindanao since 1998. According to the PDD the project is financially not attractive enough without

the CDM. A detailed barrier analysis is skipped and no further political, technical or social barriers

are mentioned by the project developers.

377 PDD: http://cdm.unfccc.int/Projects/DB/DNV-CUK1188881363.25/view [retrieved: 12.2.2010] 378 PDD: http://cdm.unfccc.int/UserManagement/FileStorage/RR5ECSW434FDHPTXRJ3YBCL49RCK24 [retrieved: 12.2.2010] 379 PDD: http://cdm.unfccc.int/UserManagement/FileStorage/USBIRW8KEMD9CQJOZ1NYT62XHPLAV4 [retrieved: 12.2.2010]


http://cdm.unfccc.int/UserManagement/FileStorage/RR5ECSW434FDHPTXRJ3YBCL49RCK24

http://cdm.unfccc.int/UserManagement/FileStorage/USBIRW8KEMD9CQJOZ1NYT62XHPLAV4



(4) One further geothermal CDM project: A geothermal power plant in Luzon also represents the

only registered CDM activity in this sector of RE technologies. Growing energy demand in Luzon is

mostly covered with diesel fuel. In addition to that, a natural gas pipeline is planned since 2001 and

should connect three gas-fired power plants despite geothermal potentials in Luzon. Not a single

geothermal project has been implemented since then despite good natural conditions. The PDD sees

one major reason for this: the privatization of the energy sector since 2001 (EPIRA) and the shortfall

of financial support for geothermal energy plants at the same time. Subsidies on imported coal for

national energy suppliers lead to further market distortion. Apart from that the government

promotes the exploitation of new natural gas fields what makes conventional gas-fired plants more

interesting and attractive for potential investors than geothermal power generation.

“The project sponsors urgently need to find additional funding in order to cover the financing gap and looks to carbon finance income as such as source of much-needed financing.”380

(5) A wind energy CDM project in the north of the Philippines: In the field of wind energy only

one project activity has been registered and implemented so far – a wind farm with a capacity of

33MW in Bangui Bay in northern Luzon. The project involves technology transfer and has been

classified as a risky pilot activity by potential investors. They guaranteed finances only under the

condition that it will be approved as a CDM project. The PDD also criticizes the lack of subsidies and

faces disadvantages compared to natural gas. The new technology also requires additional training

for local workers. We will have a more detailed look on the Bangui Bay project in chapter 4.4.2.

All in all, the support from the government for RE sources is relatively low. Several PDDs highlight

disadvantages for renewables compared to conventional sources such as natural gas:

„The Government of the Philippines is promoting the development of the country’s natural gas market (since new natural gas fields were discovered) which has a direct negative effect on the development of other types of electricity generation technologies, particularly renewables.”381

All PDDs explain how they fulfil different SD norms and principles referring to the administrative

order that prescribes the national approval criteria of the DENR. Certain projects even develop a

“sustainable development assessment matrix” with ecological, economical and social indicators.382

Biogas project proponents regard their activities as pioneer projects for further technology transfer,

capacity building and to demonstrate feasibility of an uncommon technology. Experiences from

these projects should act to drive replication throughout the country. Biomass projects face similar

barriers, involve unknown technologies and often lack experience about how to handle biomass. The

technologies used are declared to be “the first of its kind”383 in the Philippines; other projects are

unattractive for investors due to missing laws and regulation.384 They claim to promote all

dimensions of SD and involve technology transfer. Although hydropower is considered to be a

conventional source of energy in the Philippines, the PDD of the only CDM project in this area

enumerates various SD profits such as positive environmental benefits, the creation of employment

380 PDD: http://cdm.unfccc.int/UserManagement/FileStorage/ITT4XCO6F4KVVAYAE1IB3TVPNRF3QX [retrieved: 12.2.2010] 381 PDD: http://cdm.unfccc.int/UserManagement/FileStorage/XKG2H3VVI59T07P953BBUDNBE7AJGR [retrieved: 12.2.2010] 382 PDD: http://cdm.unfccc.int/UserManagement/FileStorage/6OXT0T0ICF9J4BYTPBRPIKCNCLIJXW [retrieved: 12.2.2010] 383 PDD: http://cdm.unfccc.int/UserManagement/FileStorage/RR5ECSW434FDHPTXRJ3YBCL49RCK24 [retrieved: 12.2.2010] 384 PDD: http://cdm.unfccc.int/UserManagement/FileStorage/USBIRW8KEMD9CQJOZ1NYT62XHPLAV4 [retrieved: 12.2.2010]

http://cdm.unfccc.int/UserManagement/FileStorage/ITT4XCO6F4KVVAYAE1IB3TVPNRF3QX

http://cdm.unfccc.int/UserManagement/FileStorage/XKG2H3VVI59T07P953BBUDNBE7AJGR

http://cdm.unfccc.int/UserManagement/FileStorage/6OXT0T0ICF9J4BYTPBRPIKCNCLIJXW

http://cdm.unfccc.int/UserManagement/FileStorage/RR5ECSW434FDHPTXRJ3YBCL49RCK24

http://cdm.unfccc.int/UserManagement/FileStorage/USBIRW8KEMD9CQJOZ1NYT62XHPLAV4



and the improvement of the local livelihood. The geothermal project also does not include new

technology, but highlights its effect to substitute power from natural gas. Finally, the wind power

project is considered to be a prestigious activity for the whole region in Northern Luzon with

benefits for the locals (energy supply) and the environment. Most projects face technological

barriers that lead to financial unattractiveness and investment risks. Especially pilot projects have

problems to gain initial funding. The absence of mandatory policy and regulations is a further

critical barrier for RE projects in the Philippines. The next chapter provides an insight into four RE

CDM projects and will focus on barriers, political structures, laws and regulations.

4.4 Experiences from the Ground: CDM Projects in the Philippines

We will now have a more detailed look at four different CDM projects promoting RE in the

Philippines. All of them are registered under the CDM and generate CERs for different industrialized

countries. The projects have been selected due to their regional distribution and because they

involve different kinds of RE sources. They have been visited between June and July 2009.

Interviews with participants from all projects have been conducted. Remarks from scientists, NGOs

and political statements were the basis for the previous investigation of the CDM. The following

findings represent the project investor’s perspective on the mechanism. They will not include the

full range of experiences with the CDM, but they are vital to get an insight into the project

proponents’ view and to see the general remarks and results in the light of their perspective.385

Every project chapter follows the same structure: 1) After a short presentation of each CDM

project, the case studies will focus on three major aspects: 2) How do they interact with national

and local political authorities? 3) What are the barriers and conflicts they encounter? And 4) does

the project activity promote sustainable development in the project area and beyond?386

385 Pictures from all four project sites can be found in Annex 14 of this paper. 386 The section “Interviews, Events and Project Case Studies” (pp. 128-129) provides the guiding questions for the interviews.

> Figure 4.1: CDM Projects in the Philippines: Location of the Case Studies

Map based on data from the UNFCCC [retrieved: 12.2.2010] (http://cdm.unfccc.int/Projects/MapApp/index.html)

San Carlos Renewable Energy Project

Makati South Sewage Treatment Plant Upgrade

NorthWind Bangui Bay Project

Projects are clustering around Metro Manila and in Luzon mostly due to CDM activities in extensive animal farms that reduce biogas.

Quezon City Controlled Disposal Facility



4.4.1 Makati South Sewage Treatment Plant Upgrade (Phil. BioScience)387

(1) The Makati South Sewage Treatment Plant Upgrade with On-Site Power Project has been

developed by Magallanes Bio-Energy Corporation together with Philippine Bio-Sciences Co., Inc.

(PhilBIO). The CDM project is an anaerobic digestion sludge treatment project at the sewage

treatment plant located in Magallanes Village, Makati City at the edge of a protected middle class

urban residential area within a mainly poorly developed neighbourhood. The plant was established

in the 1960s to treat wastewater from 700 hectares of residential and commercial districts in Makati

City. The CDM project activity does not include the mainstream wastewater treatment, but the

sludge only. This involves a process which generates a considerable volume of biogas everyday. One

component consists of two anaerobic digesters which stabilize the sludge and also generate biogas

which is high in methane. A Covered In Ground Anaerobic Reactor (CIGAR) was installed and an

existing open settling tank which releases biogas to the atmosphere was retrofitted to ensure

collection of biogas. The project should produce electricity of 1,990 MWh per year to realize an

energy self sufficient plant. Any further surplus biogas is being flared until a viable mechanism is

established for exporting surplus energy to the national grid. The plant caters the Makati Business

District and two other districts - about one percent of the entire population in Metro Manila.

(2) The project is working closely together with the DNA and confirms a good working relationship.

The process of planning the project since 2004 did not only involve consultations with the national

level, but also a dialogue with all affected stakeholders, the government and local communities.

Support from local authorities facilitated the implementation of the project:

“Mayors with green minds can be quite supportive for any CDM activity. Magellanes is a first class subdivision and the LGU as well as the barangay were very supportive.”

Support was also gained with the benefits for the local population: Their standard of living has been

improved, because methane which escaped into the atmosphere before has been reduced by 95

percent. The solid waste is treated more efficiently and the smell in nearby subdivisions has been

reduced. Another key issue was to employ locals during construction and for operating the engines.

(3) The project encountered basically three barriers: financial, social and political ones. The whole

project was perceived as technically and financially risky as the company could not afford to

finance a biogas digester. Acceptance and a general understanding of the project were also low:

“We talked to different levels of management and political authorities what the CDM is all about and encountered a fundamental lack of information. We had to educate the communities and explain it within consultations to gain social acceptance.“

Another barrier is a lack of political incentives. Despite the Ecological Solid Waste Management Act

of 2000388, regulations for the conversion of open sewage treatment facilities are missing as well as

efforts from the national government to promote RE projects in the barangays:

“Capacity building is a huge step forward, but the policy framework prevents the Philippines from progress. We know where the potentials are but we do not know how to use them. All this has not been scaled down to the local government units. They could provide incentives; instead there is a lack of familiarization and acknowledgement.”

387 Interview with Jo-Rex E. Camba (CDM Project Manager, PhilBIO) – 25.6.2009. PDD and project documentation: http://cdm.unfccc.int/Projects/DB/DNV-CUK1200048719.96/view [retrieved: 12.2.2010] 388 Republic Act No. 9003: www.emb.gov.ph/laws/solid%20waste%20management/ra9003.pdf [retrieved: 12.2.2010]


http://www.emb.gov.ph/laws/solid%20waste%20management/ra9003.pdf



(4) Together with a Vietnamese company PhilBIO has developed the CIGAR technology which is

unique in the Philippines. The sewage plant is considered to be one of the most progressive ones in

Metro Manila. Training for local employers was necessary to handle the uncommon technology. The

DENR as the primary CDM authority acknowledges the project. However, despite positive

experiences from Makati, there are still no national standards in the Philippines for sewage

treatment and no spill-over effects can be observed:

“An administrative order from the DENR imposes a wastewater discharge fee, but it remains too low to have an impact on any wastewater treatment facility. The conventional way to dispose waste in the Philippines is still to dump it into the river.”

A lack of regulations for selling surplus energy to the grid also leads to critical investment barriers

because of limited electricity revenues. This has changed since the oil prize reached a peak of 150

USD per barrel and the national government prompted the Renewable Energy Law. It should help to

develop the RE market, but the CDM project manager observes only little progress:

“The new Renewable Energy Law acknowledges CDM activities compared to conventional energy projects, but I do not see any further changes to support sustainable development. [...] The law means for us that surplus of power can be sold to the grid more easily [...]. At the same time the law might also be a threat to new CDM projects. Additionality will be harder to fulfil in the future.”

Nevertheless, a similar wastewater treatment project with CIGAR technology is planned in

Mindanao. The concept was submitted to the DNA already and should prove feasibility of the

technology beyond the pilot project. However, the process of identifying possible project sites is

time- and cost-consuming and represents a high investment risk. Local officials have to be

convinced project by project, barangay by barangay, as there is no supportive national legislation.

4.4.2 NorthWind Bangui Bay Project (NorthWind Power Dev. Corporation)389

(1) This CDM project is probably one of the most famous and attractive ones in the Philippines, as it

has a visible impact on a whole province. It still claims to be the only wind farm in South East Asia.

The project is located in Bangui Bay in the Province of Ilocos Norte in the North of the Philippines.

It is a rural area with people mostly living from farming, fishing or tourism. A few resorts, the

tropical environment and long-stretched sand-beaches attract tourists from all over the world. The

20 wind turbines have been erected onshore right at the coastal line of Bangui Bay and produce

electrical power of 33MW all year round. The electricity should displace power from fossil fuels and

reduce GHG emissions of approximately 57,000 tons of CO2 per year. These targets formulated in

the PDD are nearly reached in reality as the turbines are working almost non-stop.

(2) The project proponents were discussing and negotiating with local authorities and the

population right from the start. A lack of awareness for wind power was a major barrier for the CDM

project and it took several years to convince the population and all relevant political authorities:

“As the project site covers five barangays we needed the endorsement of all of them. They then had to endorse it to the town of Bangui, which afterwards provided an endorsement to the province. This process took us about three years, as it was something completely new in this area nobody really understood. The whole idea of using wind as a source of electrical power is totally new to the Philippines.”

389 Interview with Segundino A. Tiatco (Plant Manager in Bangui Bay, NorthWind Power) – 21.6.2009. PDD and project documentation: http://cdm.unfccc.int/Projects/DB/DNV-CUK1149535405.35/view [retrieved: 12.2.2010]




With the success of the project in Bangui Bay potential investors can now simply be brought to the

project site to have a vital impression of wind energy in the Philippines. It is easier for them to see

and to understand how the project works on the ground and might be implemented elsewhere.

(3) According to the plant manager the idea for the project already existed since the 1970s. A

government agency tried to implement wind power before, but failed: “It was very hard and almost

impossible to get finance from local banks. Now, they can just come here to see the success and the

value of the project.” The PDD reveals fundamental financial barriers for the CDM project to prove

the criterion of additionality. However, the plant manager describes the CDM only as a further

incentive which is in the end not necessary for the realization of the project. This perspective is

clearly opposing to the official CDM rules and regulations.

“I think this project would have been established even without the CDM. The CDM has actually not much impact on the project itself and it came last when thinking about the project design.”

He sees no severe local opposition despite some rumour about financial benefits for the World Bank:

“We are for example tide up with the World Bank. They receive the CERs generated at a fixed prize, although we could get more than it was negotiated into the contract. However, they already paid for the baseline scenario, so I think this is just fair.”

Today the Province of Ilocos Norte calls itself the “wind capital of the country” and the wind farm is

promoted by Greenpeace as a positive pilot project showing that wind power is possible in the

Philippines.

(4) The project claims to be vital for energy security of the region as there are almost no energy

sources despite a hydropower plant far away in the mountains. The technology was completely new

and unknown in the Philippines before. Now, as the turbines – designed for arctic and tropical

conditions - are running, their feasibility is proven in the Philippines. Yet, the CDM project activity

is still the only wind energy project in South East Asia. However, there are several plans for similar

projects in the Philippines. Two engineers had the chance for training in Denmark and Germany, but

the technology itself is still in the investor’s hand. Schools and universities visit the project site to

learn more about it, but the positive effect of the project remains largely restricted to the local

level. National rules, guidelines and stronger standards for RE are therefore most important for the

plant manager who demands clear legislation and strong laws to promote RE sources:

“The Renewable Energy Law for example will help a lot to support the implementation of renewable energy projects in general, and not only for CDM projects. And the benefits from renewable energy projects for sustainability are obvious: no greenhouse gas emissions, sustainable use of energy sources, social benefits and the protection of the environment.”

The Renewable Energy Law is seen as a fundamental step forward to support renewables. For the

plant manager, it gives much more incentives to promote RE project activities in the Philippines and

especially wind power projects than it would ever be possible with the CDM:

“There are already a lot of investors and firms in the starting lots and some of them are even already starting their projects. The Renewable Energy Law will definitely help to improve the situation of renewable energy in the Philippines.”

Consultants are currently investigating if it was possible to enlarge the project, or if it similar can

be realized e.g. in the Province of Cagayan. The project also aims to be a signal for rural areas and

small islands in the Philippines without any grid connection to become independent from fossil fuel.



However, stronger legislation and financial incentives are needed to promote wind power as a

feasible source of energy in the Philippines.

4.4.3 Quezon City Controlled Disposal Facility Biogas Emission Red. (Payatas)390

(1) The whole area around the third CDM project dealing with biogas extraction from a disposal

facility in Metro Manila is dominated by the huge waste disposal dumpsite which can be smelled and

even seen as a monumental hill several kilometres away from the site. The project is located in the

barangay of Payatas north of Quezon City in the northern part of Metro Manila. 120 tons of garbage

from Quezon City arrive here every day. More than 1,000 people depend on the dumpsite and work

as scavengers to search for recyclable material day by day. The company Pangea runs its CDM

project on that site. The concept is simple: Biogas coming from the dumpsite is used for electricity

generation in a 200kW generator nearby. Biogas (consisting of 50 to 75 percent methane) is taken

from the dumpsite and converted into electricity by fuelling an internal combustion engine. The

project became registered in February 2008 after almost one year of preparation.

(2) The reduction of methane as well as the production of electricity have positive effects for the

community with regard to health, their social life and the environment. A stakeholders meeting was

held in 2007 and according to the PDD and the interview partner the project received only positive

comments both from official political authorities and the local population. The Payatas Operation

Group running the waste disposal assisted Pangea with the implementation of the system. Beyond

this, the project gets support from the local community as well as from the government of the city

of Quezon. But again, this positive environment does not lead to bottom-up learning and still there

is a lack of regulations and incentives for similar projects on the national level:

“The government is on its way to recognize the clear benefits of this project. But so far, no laws have been implemented supporting the use of biogas from dumpsites. Still, the regulations are not very strict in the Philippines, although the government of Quezon fully supports our project.”

A possible step forward to promote biogas extraction projects like the facility in Payatas would be

to make these projects mandatory for all the open landfill dumpsites in the Philippines.

(3) Financial risks were again considered to be the most serious barrier for the CDM project activity:

“As a biogas facility is not mandatory for a dumpsite, you can gain profits only from selling energy from the engine. But this is by far not enough to be economically attractive for investors. So the additional credits from the CDM really made the difference [...].”

Consequently, the biogas facility would not have been possible without the CDM. However, neither

the PDD, nor the interview partner claims any further critical barriers on the social, political or

technical level that would have prevented the project from implementation.

(4) The objective of the project is to mitigate the adverse effects of methane and other gases

coming from the dumpsite. In terms of SD there are positive impacts on the state of health and the

environment as well as there are social benefits for the local community:

“It helps out in balancing the community by increasing their inhabitants’ living standard. Apart from that, the plant provides electricity that can be used by the locals. The current 200kW generator

390 Interview with Danilo Cruz (Technical Manager, Pangea Green Energy) – 16.6.2009. PDD and project documentation: http://cdm.unfccc.int/Projects/DB/DNV-CUK1185342160.98/view [retrieved: 12.2.2010]




produces 4,200 MWh of energy per year and in two years from now we plan to install a second 700kW engine on top of it.”

Still, not the entire community seems to be fully informed about the project, as many locals on the

way to the project have never heard about Pangea or its biogas project. People living in this area

are among the poorest and depend on the outcome of the dumpsite. However, there are benefits

from the project that improve the local population’s living standard by supplying electricity,

connecting households to the grid or operation a municipal hall.

There are currently 12 locals working in the biogas facility. Some of them were trained by Italian

engineers. This knowledge has been transferred to the Philippines and the project proponents can

now educate new workers on their own. A form of technology transfer has also taken place as the

biogas facility represents a pilot project and was completely unknown in the Philippines before.

Pangea has shown its feasibility in Quezon and hopes to implement similar projects all over the

country. However, the interview partner criticizes a lack of supportive legislation to use this very

practical experience from the ground on a broader level and raise awareness nationwide:

“We do make a lot of positive experience in the projects. What we need are stronger laws following these pilot projects to facilitate the realization of these kinds of projects on a broader base.”

Only one similar project exists at the dumpsite of Montalban in the North of Manila. Pangea plans to

install another facility in Moron, but has not started construction yet. Barriers on the local level

have to be overcome in every barangay again and make this projects time- and cost consuming.

4.4.4 San Carlos Renewable Energy Project (Bronceoak Inc.)391

(1) The small scale San Carlos renewable energy CDM Project is a bagasse cogeneration plant with a

capacity of 8 MW. The high efficiency bagasse cogeneration plant is built on a green field site in the

San Carlos Agro-Industrial Economic Zone on the eastern coast of the island Negros Occidental in the

Philippines. The cogeneration unit uses bagasse from sugar cane milling supplemented when

necessary with biogas, wood chips and cane trash. The plant is running since February 2009 and is

estimated to produce an amount of electricity of about 58.5 MWh per year from sugar cane, wood

chips and cane trash. 29 MWh per year should be supplied directly to the grid. The project area has

a long tradition as the prime sugar producing area in the Philippines. Sugar cane fields and

distilleries can be found all over the highly productive island of Negros with key areas producing

over 100 megatons per hectare.

(2) All in all, the project proponents made positive experiences with the relevant national CDM

authorities, although various responsibilities remain unclear after registration:

“Within one month we had the approval from the DNA. They handled us very well, but their support stops with their letter of support and at the point of registration. It took us further 24 months to construct the plant. It is not clear yet, if the DNA will also be responsible for monitoring.”

On the national level the DOE also played a supportive part for realizing the project that is located

in a sugar cane district far from any greater settlement. The area is an agro-industrial part, where

391 Interview with Ina Kadda (Project Manager Bronzeoak) – 23.6.2009. PDD and project documentation: http://cdm.unfccc.int/Projects/DB/DNV-CUK1171455227.42/view [retrieved: 12.2.2010]




only very few people actually live. Local approval is necessary for project implementation.

Authorities on the ground and barangay officials are considered to be key factor for an effective

CDM project. Without support from the local communities the project could not have been realized:

“These local authorities have actually enough power to stop the realization of your project, although all other conditions are perfect. But the two barangays involved in the project were very supportive, even though they did not really know what CDM actually was. But as long as you tell them the economic benefits from the projects it is easy to convince them and receive there approval.”

The project manager describes the acceptance for the project in the municipality of San Carlos as

“very, very warm right from the beginning.” Concerns were raised with regard to employment issues

and pollution coming from the facility. In the end, economical benefits convinced the officials.

(3) In addition to that the project did not only encounter barriers on the domestic level, but also

especially on the international level with the CDM regime itself. The project developers were facing

trouble with unclear CDM methodologies.

“The prize is high to write a PDD and so every investment is a risky one. We did not include the reduction on methane in the PDD as our consultants said there was no methodology for that. But now we know that there exists a methodology and we hope to be able to integrate this reduction in the project. Not knowing the methodologies really prevented us from doing the methane capturing.”

Another conflict between national legislation and the CDM has just been raised by earlier interview

partners: The new Renewable Energy Law gives various incentives to promote RE projects. This is

positive with regard to SD and the use of RE sources, but it will also be challenging for further CDM

projects for which it will become harder to prove additionality.

“According to the rules of this mechanism projects should be additional. What happens if now rules will be implemented making renewable energy components mandatory? The UNFCCC should really work on that issue and not punish countries for going further and beyond the project by project approach of the CDM.”

Apart from that, the project developer faces domestic constraints and serious problems not on the

national level, but with local authorities. These local officials play a key role for success.

“If you do not get any support from the barangay there will be no clearance and you will not get the permission to go with your project. The mayor of the barangay is the person to say: ‘Go ahead with your project.’ Even the national government cannot interfere on that level. But how can you get support from the mayor? With money, of course. As San Carlos Bioenergy, we can and will not support this with paying them extra just for doing their job. [...] The high level of corruption is a major barrier for implementing any projects anywhere in the Philippines.”

According to the interview partner corruption is the fundamental reason why another project in

Luzon similar to the one just described is currently on hold and cannot be implemented.

(4) As formulated in the PDD, the project promotes SD by providing RE both for the cane mill and its

ethanol distillery as well as for the Luzon-Visayas grid. The substitution of fossil fuels is estimated

to result in an annual reduction of CO2 emissions of about 37,000 tons. Apart from this, further

benefits are mentioned by the project manager:

“In the real sense of sustainable development, meaning the use of resources in a sustainable way and leave it for upcoming generations, the San Carlos project does [...] more than written in the PDD. It changed the whole agricultural way of life in the project area. Now, year-round milling and not only for six months is possible. The farming methodology is less exhaustive and the soil has more time to heal. These benefits cannot be covered by the CDM.”

The project furthermore promotes SD through technology transfer. The technology used at the

project site mainly comes from an Indian company. Locals were also able to go to Sweden for



training where they received the knowledge to run the facility. 200 mostly local employees work at

the project. Despite these benefits the project manager sees only small incentives of the CDM for

broader SD benefits: The CDM is vital for the private sector to receive credits, but sustainable

development represents only a positive side effect.

“The CDM is like a carrot for us to do the project. From a developing country’s point of view it cannot be sufficient for promoting sustainable development. This should work without credits which can only be a small incentive. [...] The CDM is not a real driver for sustainable development and its definition depends mainly on the project developers’ idea of it and the wording in the PDD. [...] The criteria of sustainable development and the reduction of greenhouse gas emissions should also be separated from each other. Even without cutting greenhouse gas emissions a project should be rewarded for supporting sustainable development.”

The project developer plans various similar projects. A biomass power plant should be developed

right next door to the existing project site. With a capacity of 15 MW it reaches the highest limit for

getting registered as a small scale CDM project. The power should go completely to the grid and is

mainly possible through incentives from the Renewable Energy Law. Still, this project succeeds to

prove additionality according to the project developer. In addition to that, Bronzeoak plans two

further projects in Mindanao and in Luzon near Manila where corruption prevents further progress.

4.5 Synthesis: About the Effectiveness of the CDM in the Philippines

In this empirical part we gathered experiences from the ground and discussed the perspective of the

CDM to overcome barriers for RE sources, promote SD and shape the political environment in the

Philippines. We have investigated the political and socio-economic framework conditions for the

CDM and evaluated statements and commitments from all 25 registered RE projects and revealed

further details from four case studies on the ground. Together with the previous chapter on the CDM

as an international regime we will now draw our first conclusions on the effectiveness of the

mechanism in terms of the three criteria mentioned above. We also examined how the domestic

political sphere interacts with the international CDM regime and how national and sub-national

political conditions affect project implementation. These findings will be compared with the

situation in China and India later on. This chapter will summarize major ideas about RE projects in

the Philippines – taking the first sub-question of our research design as a stating point: Can the CDM

be described as an effective global regime in the field of renewable energy with effects going

beyond concrete projects on the ground in the Philippines?

Based on experiences from the Philippines first comments on that question should be made here.

The government of the Philippines has implemented a variety of CDM authorities and underlines the

positive impacts of the CDM for the country. At the same time there are ambitious targets to

promote RE sources in the Philippines. The CDM is seen as one instrument to enhance capacity

building, promote technology transfer and give financial incentives especially for pilot projects. On

the other hand a number of CDM projects still encounter various barriers – in particular on the

political, administrative and on the economical level. These conclusions can be drawn based alone

on the already successfully implemented CDM projects promoting RE technologies.



Although the CDM remains restricted to very concrete projects and does rarely involve any further

commitments to SD the mechanism does have the potential to push a development that goes beyond

the pure financial investment of a number of small scale projects. What do we learn from the

empirical data about the effectiveness of the CDM?

The CDM minimizes and eliminates barriers for renewable energy projects not only on the

financial level, but also with regard to technology transfer and capacity building.

Referring to the analytical framework from Wilkins we can draw the following conclusions: The

natural conditions in the Philippines are indeed positive to promote various forms of RE. The

political sphere and legislation in the country however are supportive for a sustainable development

and deployment of RE only at a first glance. Although there are ambitious political goals and even

laws and regulations to promote RE there is a lack of law enforcement and effective

implementation. Moreover, obvious contradictions to the promotion of RE can be observed, like

incentives for a faster exploitation of national gas sources or the privatization of the energy sector.

A number of stakeholders are involved in RE projects. This leads to unclear responsibilities in this

complex vertical and horizontal political system, similar to the issue area of climate change.

The CDM has the potential to minimize if not eliminate barriers for renewables in three areas: the

capacity for new technologies on the local level, technical barriers as well as financial and

investment problems especially for previously unknown or uncommon pilot projects. The financial

revenues from the CDM are not only vital to promote the concrete projects, but they provide also

positive incentives going beyond this, such as the training for local personal or the diffusion of

climate-friendly technologies. Social barriers such as scepticism towards new forms of power supply

on the local level or a general lack of acceptance for new technologies also play an important role

when it comes to the implementation of CDM projects. But as they are complex and vary from

Source: Illustration by the author based on Wilkins 2002.

> Figure 4.2: Wilkins’ Analytical Framework Applied to the Philippines

Laws to promote renewable energy exist – but are often not specific. This has changed with the Renewable Energy Law

in 2008. Local barriers are strong during implementation.

Domestic capacity and is supported by the CDM; pilot projects demonstrate

feasibility. Yet, strong scepticism towards new technologies exists.

There is a very active and broad civil society. Environmentalists demand

more action for renewables, but have only indirect influence.

Investment barriers are mostly minimized or eliminated by the

CDM. Still there are financial barriers to renewable energy.

This has changed with the Renewable Energy Law

in a positive way.

Technical barriers are reduced with the help of the CDM. New technologies and knowledge are partly transfered to the Philippines.

cost efficiency


capital costs

In the Philippines, a wide range of RE sources is available. The political framework is supportive only at a first glance. Factors like corruption and bureaucracy are strong barriers.



project to project they cannot be investigated in depth in this thesis. Nevertheless social aspects

and the broad field of civil society have to be considered as important context variables. Still, the

CDM remains first of all indeed a market mechanism with financial incentive for project developers:

“Often, project developers in the Philippines still face financial barriers. Although the CDM promotes investments you still need a lot of funding to start the project. And then you need the money to go to the CDM process. The CDM is a sort of a push, but not sufficient enough.”392

Yet, technology and knowledge transfer as well as capacity building can be observed on the local

level. This has also positive effects on the political framework, but only on a very small scale. There

is also an obvious discrepancy between theory and practise concerning the promotion of further

commitments. Experiences with project implementation and the Renewable Energy Law show

critical conflicts between the CDM and national legislation. Instead of promoting RE sources the

CDM can even be a barrier for stronger legislation, as CDM projects are harder or even impossible to

implement and struggle to fulfil the criterion of additionality with a progressive RE law.

CDM projects do promote sustainable development on the social, economical and

environmental dimension. However, experience cannot be translated into national

legislation making certain climate-sound technologies mandatory.

Experiences from the Philippines show that the unequal distribution of CDM projects among

developing countries cannot alone be explained by the mechanism itself. Quite the opposite is the

case. CDM projects can promote sustainable development beyond the actual project. The

mechanism provides necessary incentives for previously unknown technologies like wind turbines.

Yet, experts like Sandee Recabar from the Philippines’ Climate Change Centre raise criticism:

“The CDM has basically two objectives: reducing greenhouse gas emissions and promoting sustainable development. If you want high emissions reductions, these are usually emissions reductions from big companies. But their sustainable development impact is very low. Projects with high sustainable development impacts are usually projects with very low emissions reductions. Of course, if you are a buyer you would go for the emissions reductions projects. This is the major clash that also leads to tensions between countries. Consequently, the sustainable development benefits should be enhanced. We are participating in the CDM, because it provides sustainable development.”393

This is a clear gap between the objectives of the CDM and practical experience from projects on the

ground. Furthermore, technology and knowledge transfer affects the local level, but remains almost

without any impact on national standards and regulations. Making the extraction of methane

mandatory for every landfill dumpsite would be one example of how positive experiences from one

specific project could be translated into national legislation to promote SD with benefits both for

the environment and the population. However, this is not possible under the current scheme of the

CDM. If the national government decided to implement such kind of legislation to promote project

developers, any further project would struggle to prove additionality because the CDM might not be

the decisive factor to realize the project anymore. This is a critical contradiction of the CDM as

research has proven already in 2008:

Policies and other actions that show government support for the goals of CDM are critical. National laws do more than just run in the background of CDM projects. [...] The complete implementation of existing laws [...] and the enactment of those pending in the congresses [...] may variably affect the ease or difficulty of getting Philippine CDM projects approved by the CDM EB.”394

392 Kazuhisha Koakutso is Market Mechanism Sub Manager at the IGES Japan (Interview with Koakutso, Kazuhisha, 6.12.2008) 393 Interview with Sandee G. Recabar, 6.12.2008. 394 Tuazon, A. 2008: p. 21.



According to Anna Mae Tuazon laws that provide general directions, but do not mandate specific

activities can be also advantageous for project proponents in proving a CDM project’s additionality.

The government of the Philippines has at least the chance to learn from CDM pilot projects and

implement laws and regulations to support SD. The Renewable Energy Law for example gives

positive incentives for potential project proponents: Clear targets and the aim to promote RE are

articulated in the law which can make RE sources more competitive with fossil fuels. This however

makes it harder for CDM project developers to prove additionality. Moreover, a fair and equal

connection to the grid remains a problem especially for decentralised projects in rural areas. A lack

of clear competencies on the institutional level and a high degree of bureaucracy are also

fundamental barriers to implement RE projects in the Philippines. Due to severe budget constraints

the DENR relies on foreign assisted projects and grants to fund operations, which leads to a short-

term projective approach, lack of sustainability and often changing priorities.

Especially the case studies revealed that CDM projects can have positive SD impacts only to a

certain point. They might be sustainable, progressive, climate-friendly and community supportive,

but almost no spill-over effects with regard to further similar projects or stronger legislation can be

observed. The mechanism creates even a serious contradiction between theory and practice. With

the criterion of additionality every single project has to prove that it could not have been realized

without the CDM. At the same time new and progressive regulations promoting RE sources will be

challenging for a number of projects to prove additionality. Catherine Maceba from the Renewable

Energy Coalition therefore criticizes the CDM rules and regulations since CDM project developers

have problems to get credits with the Renewable Energy Law in force.395 Paradoxically, any

legislation promoting renewables and on a broader level SD in the host country can be a threat to

potential CDM projects. The CDM eventually does not promote RE friendly policy; it does instead

represent a major barrier for further legislation.

The CDM led to several changes in the political environment of the Philippines – especially

on the polity dimension, but not in terms of policy and politics.

The political framework conditions are crucial for the promotion of RE projects, both on the

national and the local level. National legislation provides the framework for investors and project

participants. On the local level, informal political relations, corruption and a lack of capacity are

major barriers for implementation. Other barriers also exist on the social, technical and especially

economic level.396 However, the vital role of the civil society and the high level of corruption

obviously influence the potential for CDM projects. Consequently, the impact of the political

environment of the Philippines and especially the meaning of local political conditions on the CDM is

indeed very high and political change can be observed.

As the comments on sustainable development have just shown, the impact of the CDM on laws and

regulations (policy) promoting RE and referring to experience from the CDM is quite low. This is

especially paradox when you consider that sustainable support for renewables needs strong and

supportive policy. At the same time, the Influence of the CDM on political structures (polity) is

395 Catherine Paredes Maceba, spokesperson of the “Renewable Energy Coalition” (Interview with Maceba, 17.6.2009). 396 Various barriers were mentioned in this paper, but especially technical and social ones could not be discussed in depth.



relatively high. As it was shown in chapter 4.3.1 the CDM has changed the political environment in

the Philippines with new authorities and bureaucracy in the field of climate change and project

implementation. The mechanism led to an enormous institutional framework for the promotion of

RE projects in the Philippines. CDM authorities provide guidelines and support for potential CDM

investors and project participants. Although the high degree of ineffective bureaucracy and

corruption in the Philippines causes major barriers for potential CDM projects the mechanism itself

has initiated a strong institutional framework for RE projects. However, with the DENR as the DNA

responsible for RE projects there are potential conflicts with the DOE for further changes. If

experiences from energy-related CDM projects should be translated into national legislation the DOE

has to be considered as the major political institution.

One might finally conclude from the theoretical background about effective international regimes,

that the CDM should have also changed the processes of decision-making (politics) in the field of

renewables. Based on findings from the projects on the ground this was not the case in the

Philippines. For example, the DENR has not gained competences from the DOE in the field of

renewables and successfully implemented CDM projects do not facilitate decision-making processes

in other barangays. CDM activities encounter the same scepticism and political barriers like other

local RE projects. On a broader perspective the issue of global warming and the high vulnerability of

the Philippines to climate change led to new ways of decision-making in this area. But the question

if the CDM had an impact on the higher priority of climate change in the Philippines remains hard to

answer. Tuazon from the Philippines criticises the CDM, but remains optimistic with regard to its

potential: “The CDM as a mechanism gives us that extra boost to pursue what we, in fact, already

ought to do in terms of protecting and adapting to our changing environment.”397 A causal

relationship between the CDM and an increased awareness for climate protection and the need for

renewables however is hard to find.

Compared to other developing countries a relatively high number of CDM projects have been

realized in the Philippines so far – still they are only a few. The promotion of RE sources with the

help of CDM projects heavily depends on the national political framework conditions. Apart from

that, further aspects like the influence of international organizations or the situation of the global

carbon market have to be considered, but could not be taken into account in depth. Further results

are expected from a comparison with the Republic of India and the People’s Republic of China.

The Republic of the Philippines shows huge potentials for RE projects. They have a strong legislation

to promote SD in this area and the capacity needed to register CDM projects. At the same time

deficits on the local level as well as a lack of implementation can be observed. CDM show where the

potentials for the future might be. But they also reveal barriers and might even prevent the country

from strong SD in certain areas. If this observation is also true in India and China, two emerging

countries in transition with the highest number of CDM projects, will be investigated in the

comparative part of this work.

397 Tuazon, A. 2008: p. 21.



5 Comparison: CDM Projects in India and China

“Avoiding the unprecedented threats posed by dangerous climate change will require an unparalleled collective exercise in international cooperation.”398

We have gathered some experiences from a single CDM host country. This should now be reflected

in the light of two countries in transition: India and the People’s Republic of China. Although it is

not possible to examine the situation in these two countries in this thesis as detailed as it was just

done with the Philippines, this comparative approach should generate further incentives for a

broader perspective of this work, to formulate criticism as well as needs for further research.

Eventually, the experiences from the Philippines should be compared to the situation in India and

China. Why do we include China and India in this comparative approach? The three fundamental

reasons should be mentioned here:

1) China and India dominate the CDM market and show huge GHG reduction potentials in the

energy sector. Both countries accumulate by far the most CDM project activities. Out of 5.604

projects in the CDM project pipeline (December 2009), 1.499 were based in India and 2082 in

China.399 Both countries are the emerging giants not only of the world economy and population, but

also on the international energy markets. India and China show similar fossil fuel consumptions with

coal and oil accounting for the biggest share in total primary energy supply. They are also the two

countries with the biggest GHG reduction potential, estimated to be about 300 and 777 million tons

of CO2 equivalents, respectively.400 Developments in China and India have a huge impact on the

world energy market. Growing energy demand contributes to an improved quality of life for millions

of Chinese and Indians. Unfettered growth is alarming with regard to climate change.

“The challenge for all countries is to put in motion a transition to a more secure, lower-carbon energy system, without undermining economic and social development. Nowhere will this challenge be tougher, or of greater importance to the rest of the world, than in China and India.”401

Immediate policy action and technological transformation on an unprecedented scale are needed to

achieve ambitious emissions reduction targets and further economic development at the same time.

2) The political settings in China and India differ from each other. China and India are both

centrally planned, with five-year plans. Still, both countries are very different with regard to their

macro-political situation and constitution: On the one hand we can investigate a federal India with

a national government and fundamental authorities on the state level and severe ethnical conflicts;

on the other hand there is a centrally organized communist China with the national government

having direct authority over the Provinces leading to restrictions on the provincial and local level. It

will be interesting to evaluate the impact of these two very different political settings on the CDM

in both countries. Do politics matter in these somehow most-different designs and how do they

influence the effectiveness of the CDM?

398 UNDP 2007(b): p. 10. 399 UNEP Risoe Centre 2010. 400 Ganapati / Liu 2008. See Annex 15 for the countries’ total primary energy supply. 401 IEA 2007: p. 3-4. In the reference scenario of the IAE, primary energy needs expand at an average annual rate of 3.2 percent in China and 3.6 percent in India – much faster than in the rest of the world. Together, both countries account for 45 percent of the increase in world energy demand until 2030.



3) CDM-related institutions and policies are different in both countries. In China, provincial

agencies have little only impact on the CDM procedures. On the other hand, CDM Promotional

Centres on the State level in India have a high stake in developing CDM projects due to the federal

structure. A consequence of this is, that “CDM projects are more evenly distributed among the

provinces in China than they are among the states in India.”402 China’s DNA is located in a powerful

central planning agency, whereas the DNA in India is part of a less powerful environment related

ministry.403 China’s DNA highlights and supports priority sectors, whereas India follows a project-by-

project approach to increase project diversity, but at higher cost. NGOs have only little political

room to influence the CDM in China, whereas in India a strong environmental movement exists to

monitor and criticise CDM project implementation. China and India also differ with regard to their

sustainable development criteria: China only formulates broad environmental goals in national

programmes, whereas India has set up specific criteria.404

All this shows already very different political settings for the CDM regime. We might therefore

expect different political barriers for the effectiveness of the CDM. This will be discussed and

evaluated in this chapter. Experiences from a developing country like the Philippines should be

compared with data from these large countries in transition. The aim of this chapter is to provide a

reflection of the experiences from the Philippines with the help of very different political settings.

In addition to that, a lot of research has been done already in the fields of CDM and RE for China

and India, which makes it easier to rely on fundamental data for both countries. Both case studies

follow an identical structure and methodology. If possible, the same sources as for the Philippines

have been used for comparable statistical data:405

Both countries will be introduced with some general remarks on their situation with regard

to climate change and their commitments to climate-friendly technologies and policy,

before a further chapter will then examine the overall potential for RE sources in both

countries as well as the political and socio-economic framework conditions relevant for the

development and deployment of RE sources in India and China (chapters 5.1.1 and 5.2.1).

A next section will then deal with the energy sector in each country with regard to the

three political dimensions (policy, politics and polity) that are vital to promote any political

change like in the field of RE in our case (chapters 5.1.2 and 5.2.2).

Afterwards, the current situation of the CDM should be examined as well as the

implementation process in both countries. Special attention will be drawn to actors and

institutions that are involved in CDM regulations and procedures (chapters 5.1.3 and 5.2.3).

A third section will then summarize empirical data from RE CDM project activities in the two

countries in transition – concentrating on barriers and SD benefits of these CDM projects. As

it was done in the case of the Philippines before, a number of PDDs from CDM projects

dealing with renewables will therefore be examined (chapters 5.1.4 and 5.2.4).

402 Ganapati / Liu 2008: p. 356. 403 The Chinese DNA is located in the National Development and Reform Commission; in India the DNA is located in the Ministry of Environment and Forests. 404 See Ganapati / Liu 2008 for this paragraph. 405 The following sources were used to accumulate data and information about the two case studies: UNDP, UNFCCC, World Bank, ADB, Germanwatch, Greenpeace, IEA, IGES as well as reports from further institutions.



This comparison will end with a synthesis of both cases, where findings from China and India will be

reflected in the light of the theoretical framework of this work and remarks will be made on the

interplay between domestic politics in China and India and the international regime of the CDM.

5.1 Promoting Renewable Energy through the CDM in India

The structure of this chapter should follow the Philippines’ case study: It will first set the general

framework conditions for RE projects in the country paying attention to policy, polity and politics,

before we will investigate the situation and implementation of CDM projects in India and finally

have a closer look at specific barriers and perspectives of RE projects. With a size of 3.28 million

km2 and more than 17 percent of the world’s population India plays a significant role not only in

world politics and economics, but also in the international climate negotiations under the

UNFCCC.406 The Human Development Index (HDI) ranks India among the countries with medium

human development (HDI value of 0.619), constantly increasing since 1975 with a per capita GDP of

3,425 USD.407 India signed the Kyoto Protocol as a non-Annex 1 country without any binding GHG

emissions reduction targets. In accordance with the rules and regulations of the framework

convention the country presented its Initial National Communication to the UNFCCC in 2004. India

raises several points to highlight the importance of the climate change issue for the second most

populous country in the world with nearly 64 percent of the population depending on agriculture.

With an annual average economic growth rate of 6.6 percent since the 1990s, India is among the 10

fastest growing countries in the world with GHG emissions expected to grow drastically to meet

developing goals especially in the rural areas and decrease the high level of poverty. 28 percent of

the Indian population (about 320 million people) live below the poverty line.

“Notwithstanding the climate-friendly orientation of national policies, the development to meet the basic needs and aspirations of a vast and growing population will lead to increased GHG emissions in the future.”408

The energy sector is dominated by coal and oil, leading to high GHG emissions. Renewables account

for about 30 percent of the total primary energy supply in India. This also includes traditional

biomass for cooking and heating which leads to further GHG emissions. Based on 1994, the

reference year for the UNFCCC, 1.229 billion tons of CO2 equivalent of anthropogenic GHG were

emitted in India, with 743,820,000 tons deriving from the energy sector. This means a per capita

emission of about 1.3 tons. India’s per capita carbon footprint409 places the country on position 128

in the world. But with 1,342 billion tons of CO2 emissions in 2004 India is the world’s fourth largest

emitter of CO2 and responsible for 4.6 percent of worldwide emissions.410

406 Data and figures in this paragraph are based on: Government of India 2004 as well as UNDP 2007. 407 UNDP 2007. 408 Government of India 2004: p. ii. 409 The per capita carbon footprint is the amount of GHG emissions an average Indian is responsible for. For further reading see Wiedmann, T. / J. Minx 2008: A Definition of 'Carbon Footprint'. Ecological Economics Research Trends. C. C. Pertsova, Chapter 1, pp. 1–11. Nova Science Publishers, Inc, Hauppauge NY, USA. 410 Figures from UNDP 2007.



The country describes itself as concerned about the impacts of climate change, because a large

number of people depend on climate-sensitive sectors like agriculture and forestry for livelihoods.411

Impacts on the forest ecosystem, water resources and coastal areas due to sea-level rise are

expected if the temperature furthermore increases. This is also confirmed by the Germanwatch

Climate Risk Index412, where India ranks on number seven among the countries most vulnerable to

climate change and most affected from extreme weather events between 1990 and 2008. The Indian

government has also initiated mechanisms to raise awareness for climate change, not only by

hosting COP 8 in 2002, but also by setting up Environmental Information System (ENVIS) Centres

throughout the country to provide environmental information to scientists, policy planners, decision

makers and other stakeholders. NGOs like Germanwatch acknowledge climate-friendly policy in

India.413 However, climate protection for India only goes along with sustainable development, which

means for India to promote an environmentally friendly path, but to achieve ambiguous economical

development targets at the same time.

“The principal objective of the national development strategy is to reduce the incidence of poverty to 10 percent by 2012 and provide gainful employment. The target GDP growth rate of 8 per cent during the current decade, therefore, aims to double our per capita income during this period.”414

These development goals will also lead to increasing energy consumption both at macro and micro

levels, and consequently to increasing GHG emissions. People in countries like India see climate

change as a far more pressing threat than people in industrialized countries: “Only 22 percent of

Britons saw climate change as ‘one of the biggest issues’ facing the world, compared with almost

one-half in China and two-thirds in India.”415 The awareness for climate change issue is high.

5.1.1 Potentials and Framework Conditions for Renewables in India

This chapter will first examine the general potentials for renewables in India (A). It will then

investigate possible barriers for RE projects in this country focusing on the same three major levels

like in the Philippines: the political (B), economic (C), and social (D) framework conditions.

(A) The potentials for renewables in India: As we have seen earlier in this paper, the global

reserves of RE that are technically accessible are large enough to provide about six times more

energy than the world consumes. What is the situation like for renewables in India? Greenpeace

projects that by 2030 about 35 percent of India’s electricity could come from renewables416 if RE

solutions - especially decentralized ones in rural areas - are implemented and fossil energy sources

are phased out. Today, RE sources account already for 31 percent of India’s primary energy

demand, but only for 15.5 percent in electricity generation. This relatively high share can be

411 UNDP 2007, p. 93: “Models for farm income in India as a whole suggest that a 2–3.5°C temperature increase could be associated with a net farm revenue reduction of 9–25 percent.” 412 Harmeling, Sven 2009. 413 Germanwatch acknowledges India’s climate-friendly legislation in the Climate Protection Index (Burck, Jan / Bals, Christoph / Rossow, Verena 2009) where India ranks among the eight countries with “good” GHG emission levels and trends as well as positive legislation. Germanwach also acknowledges India’s role in international climate negotiations and upcoming climate-friendly incentives within the country. 414 Government of India 2004: p. xiii. 415 UNDP 2007: p. 66. 416 Greenpeace / EREC 2008.



explained with the use of traditional biomass as the most important renewable source in the heating

sector. With a ministry exclusively for RE development (Ministry of New and Renewable Energy,

MNRE) India has one of the largest programs worldwide to develop and deploy RE sources. Hydro,

solar and wind power as well as biomass all have a huge potential for further deployment according

to the Global Energy Network Institute.417

Small hydropower (less than 25 MW) is the most utilized source for RE production in India. 4,096

potential sites have been identified all over the country with a total potential capacity of 15,000

MW. 1,520 MW are currently installed. India’s geographical location makes the country interesting

for solar power generation – especially for areas without electrical grid. Thar Desert alone has the

potential to generate 700 to 2,100 GW of energy through solar power. In November 2009, the

Government of India proposed to launch its Solar Mission to generate 1,000 MW of power by 2013

and up to 22,000 MW by 2022.418 According to the World Wind Energy Report 2008, India has a well-

established wind industry with a total capacity of 9,587 MW. The country plays an increasingly

important role on the world markets with stable growth in 2008.419 The wind power potential is

supposed to be 46,092 MW. The potential for India’s biomass is estimated to produce 19,500 MW

(3,500 MW from bagasse-based cogeneration, 16,000 MW from surplus biomass). Today, India has a

power capacity of 537 MW from biomass commissioned and 536 MW under construction.420

(B) Political framework conditions:421 India is considered to be the largest democracy in the

world. Occupying 2.4 percent of the world's land area, India supports 17 percent of the world's

population. It is a federal republic with a variety of ethnic groups, religions and 23 different official

languages. This diversity is also reflected in the Indian social and political organization which is still

dominated by religion, caste, and language. However, as the private sector offers more and more

job opportunities and chances for social mobility increase, “India has begun a quiet social

transformation in this area.”422 According to its constitution India represents a “sovereign, socialist,

secular, democratic republic.”423 The country is furthermore described as a “Union of States”, with

a more powerful central government than in a British-style parliamentary system. The bicameral

Parliament consists of the Rajya Sabha (Council of States) and the Lok Sabha (House of the People).

The president’s duties are largely ceremonial. The real national power is executed by the Cabinet

(senior members of the Council of Ministers) led by the prime minister. Confidence in legislation is

high, although serious barriers like corruption exist:

“Investors can [...] have some confidence in national and state laws which, in principle, offer considerable protection. However, in practice, the legal system is characterised by very serious delays and there are cases of corruption and undue interference.”424

Economical liberalization and reforms in the 1990s brought more freedom and power to the 28

States and 7 Union Territories of India – especially with regard to foreign investments and even

417 See for the following figures: Global Energy Network Institute 2009. 418 The Times of India 18.9.2009: “India targets 1,000mw solar power in 2013” (timesofindia.indiatimes.com/india/India-targets-1000mw-solar-power-in-2013/articleshow/5240907.cms) [retrieved: 12.2.2010] 419 World Wind Energy Association 2009. 420 Global Energy Network Institute 2009. 421 Data in this chapter are mainly based on information of the U.S. Department of State 2009 (a). 422 U.S. Department of State 2009 (a). 423 The Constitution of India: (http://indiacode.nic.in/coiweb/coifiles/preamble.htm) [retrieved: 12.2.2010] 424 IEA 2007: p. 427.

http://timesofindia.indiatimes.com/india/India-targets-1000mw-solar-power-in-2013/articleshow/5240907.cms

http://timesofindia.indiatimes.com/india/India-targets-1000mw-solar-power-in-2013/articleshow/5240907.cms

http://indiacode.nic.in/coiweb/coifiles/preamble.htm



international commitments.425 The States' Chief Ministers are responsible to the legislatures like the

Prime Minister is responsible to the parliament. A lack of control of the executive branch and the

insufficient implementation of political decision are seen as two major problems of the Indian

democracy. However, the country has an independent judicial system with a Supreme Court similar

to those in Anglo-Saxon countries.

Another feature of the Indian federalism are traditional village councils (Panchayats), promoting

popular democratic participation through local self-administration.426 Although these village

councils are under the States’ rule, they were strengthened by reforms in 1993 and saw a

constitutional emancipation from the States. Since then, villages are directly involved in the

formulation and implementation of rural projects through their participation in District Planning

Committees. Furthermore, they gained the right for taxation. Although the new political power also

led to corruption and conflicts between different castes, the overwhelming aim of the reform to

empower the villages was considered to be successful. The Panchayats are also described as the

third column of the Indian federalism in a country with more than 600.000 villages.

(C) Economic framework conditions:427 India has seen an enormous economic development since

its independence in 1947 and belongs to the world’s fastest growing economies with average growth

rates of 9 percent over the past four years. In 2008 India had a GDP of 1,217 billion USD.

“A low-income country with mass poverty at the time of Independence in 1947, India now has a diminishing pool of very poor people and is poised to cross the threshold to join the ranks of the world’s middle-income countries.”428

With a growing population of more than one billion people India still faces enormous problems such

as poverty. 28 percent of the people in rural areas and 26 percent in urban areas live below the

national poverty line. The economic growth holds benefits only for a small number of people

whereas poor States continue to struggle with poverty alleviation.

“Faster economic growth has seen rising disparities between urban and rural areas, prosperous and lagging states, and skilled and low-skilled workers. India’s richest states now have incomes that are five times higher than those of the poorest states.”429

This causes severe development challenges.430 The pace of economic development places huge

demands on power supply and transportation infrastructure. Manufacturers for wind turbines and

other RE sources however basically find a positive climate for investments in India. Compared to

China and other developing countries, service activities account for a large share of India’s

economy. In 2005, they contributed to 54 percent of the national GDP - with the industrial sector

contributing to 27 percent. Productivity in India remains relatively low compared to OECD

standards, “so the potential for further growth through productivity gains is substantial.”431

(D) Social framework conditions:432 Despite constantly increasing average incomes (average per

capita GDP in 2006 was 3,736 US Dollar) poverty remains a huge challenge for India. Social problems

425 Wagner, Christian 2006: pp. 91ff. 426 Wagner, Christian 2006: pp. 98ff. 427 Data in this chapter mainly from World Bank 2009 (a). 428 World Bank 2009 (a). 429 World Bank 2009 (a). 430 E.g. 46 percent of the children younger than five years are undernourished; the female adult literacy is 48 percent. 431 IEA 2007: p. 425. 432 For data in this section see especially Human Rights Watch 2009.



even increase due to the caste system and ethnical conflicts. India is a multiethnic country with

armed conflicts between various groups. Maoist Naxalites for example continue to carry out

bombings and killings in several Indian States; further violence has continued in Kashmir and in the

northeast of India, particularly in Manipur. Beyond these conflicts, Human Rights Watch observes

and criticises various human rights violations in India despite a positive environment:

“Despite an overarching commitment to respecting citizens’ freedom to express their views, peacefully protest, and form their own organizations, the Indian government lacks the will and capacity to implement many laws and policies designed to ensure the protection of rights.”433

According to Human Rights Watch the Indian government fails to protect vulnerable communities

and religious minorities. Human rights violations and armed conflicts remain major threats to

commitments from national and foreign investors to promote CDM projects in the country. However,

India is considered to have “a strong and proactive civil society and a free and vibrant press”434

according to the IEA. NGOs have developed to professional interest groups over time.

Environmentalists for example raise concerns about ecological and social effects of industrial

projects. However, civil actors are not as organised and effective as in western societies.

5.1.2 The Energy Sector in India: Policy, Polity and Politics

In 2006, primary energy demand in India was almost equivalent to Japan (with a population of about

128 million people).435 The growth in total primary energy demand is high and reached 537 million

tons of oil equivalent (MTOE) in 2005, although the per capita demand remains extremely low

compared to OECD countries. The Indian energy sector is considered to be a major constraint to

deliver an annual 8 to 9 percent growth rate. Several measures have been undertaken to achieve

these targets – especially in rural areas.436 17 percent of the world’s population live in India, but

they account for only 5 percent of world energy demand. According to the 2007 Human

Development Report the number of people in India without access to modern electricity is about

half a billion.437 The higher energy demand due to economic growth leads to severe problems:

“Power shortages and fluctuations in voltage and frequency are a common feature of power supply in India. [...] The gap between demand and maximum supply nationwide reached 14% in 2006 during peak periods, because of unreliable supply and limitations of the national transmission network.”438

Although India has initiated a liberalization policy in 1991, the power sector is still dominated by

large monopolies that control both power supply and distribution. Coal India for example produces

84 percent of domestic coal. Most electricity generating capacity is state-owned. However, some

private generation is undertaken and according to the IEA “recent reforms have brought more

private participation in India's energy sector.”439 Most state-owned power utilities are in a

financially weak condition, with average annual losses of about 40 percent. Energy prices in India

are therefore heavily subsidised. These and other major problems in the energy sector are

433 Human Rights Watch 2009: p. 249. 434 IEA 2007: p. 427. 435 Data in this chapter are mainly based on IEA 2007. 436 UNEP Risoe Center 2007 (b): pp. 43-46. 437 UNDP 2007: p. 44. 438 IEA 2007: p. 449. 439 IEA 2007: p. 443.



addressed by current reforms: The Electricity Act from 2003 for example provides a framework for

more efficient and equitable tariffs. Furthermore, new regulatory structures have been created:

“Energy reform in India provides the international community with an opportunity to support national policies that will also advance global climate change mitigation goals. Early adoption of clean coal technologies and best-practice international standards would enable India to change its emissions trajectory while meeting rising energy demand.”440

The IEA Renewable Energy Database441 lists 13 policies and measures since 2001 relevant for the RE

sector in India. The 2003 Electricity Act recognises the role of RE in India and promotes

cogeneration and electricity generation by improving connectivity with the grid and forcing energy

providers that a certain percentage of the total consumption of electricity in the area of a

distribution licensee must come from renewables. In accordance with the Electricity Act the Indian

government also released the National Electricity Policy in 2005 to promote non-conventional

energy sources and reduce the capital cost of RE projects. Financial incentives, tax reductions and

concessions for biogas, solar power and wind energy entered into force between 2004 and 2008 and

are therefore relatively new. The National Action Plan on Climate Change442 finally emphasises the

meaning of solar energy to make solar power competitive with fossil fuels in the long run. The

Indian government seeks to have an integrated energy policy with consistent tax structures, uniform

treatment of externalities, consistent regulations and regional balanced development.443 Reforms

however are not easy to implement, as many actors are involved:

“If the energy system is to be efficient, our policies must be integrated. Currently with five separate ministries [...], each concerned with its own turf, policies are not always consistent, opportunities for inter-linkages and synergy are missing and sub-optimal solutions are the result.”444

Five different ministries and several government commissions are responsible for policy and

implementation in the energy sector. A Planning Commission assesses energy resources in the

country and formulates India's five-year plans. The Ministry of Power is responsible for general

legislation, long-term power planning and development. The Ministry of Coal, the Ministry of

Petroleum and Natural Gas as well as the Department of Atomic Energy are all responsible for

determining policies and strategies with regard to their specific source of energy. The Ministry for

New and Renewable Energy finally seeks to expand the use of RE, but finds itself under permanent

competition with the other authorities.445 State Electricity Regulatory Commissions (SERCs) across

the country foster an atmosphere conducive to the rapid development of RE generation. However,

India is a federal state with considerable power of the State governments in the energy sector. It is

impossible for the Indian parliament to decide on certain energy aspects in the States.

“In general, as in most federal systems, the states are responsible for implementing national laws, but can also issue state laws and regulations of application in their own territory. As a result, the evolution of power-sector reforms and the level of penetration of renewable energy sources [...] differ widely among states.”446

440 UNDP 2007: p. 152. 441 International Energy Agency (IEA) 2009. See Annex 10 of this paper for an overview. 442 Government of India 2008. 443 For more information see: Government of India 2006. 444 Government of India 2006: p. 15. 445 IEA 2007. There are even more authorities involved such as the Ministry of Agriculture, the Ministry of Rural Development and the Ministry of Environment which approves and administers CDM projects in India. 446 IEA 2007: p. 452.



Also environmental issues are originally reserved to the States according to the constitution. The

administrative capacity and political will to environmental protection however varies among States

and even if they cooperate, federalism introduces administrative difficulties.447

Coal is by far the most important energy source in India, which has negative effects on the

environment. India is already facing serious energy-related environmental damage such as massive

pollution and over-extraction of water for mining purposes. Coal is even expected to expand

dramatically over the next years448 while RE sources are not well developed yet. Even the Indian

government admits a lack of incentives:

“A number of steps are being initiated to develop renewable sources of energy in a systematic manner. However, coal being abundant, cheap and locally available would remain mainstay of the Indian energy system for energy security reasons.”449

Between 2015 and 2030, coal-fired power capacity is projected to double, according to the IEA.

India accounts for around 10 percent of the world’s known coal reserves. Business-as-usual scenarios

highlight increasing CO2 emissions due to an increasing share of coal in power supply: “Coal–based

emissions are projected to increase from 734 million tons of CO2 in 2004, to 1,078 million tons in

2015 and 1,741 million tons of CO2 by 2030.”450 Despite its high potential only two to four percent of

the national energy mix come from RE sources, excluding traditional biomass. Greenpeace has set

up a scenario to achieve a share of 20 percent by 2020 and 60 percent by 2050.451 Renewables

account for about 32 percent of primary energy consumption in 2003 / 2004 – mostly due to

traditional biomass cooking and large hydro plants. The Indian government admits that “the actual

share of modern renewables [..] in India’s energy mix is significantly lower”452, although India runs

one of the most diverse and biggest RE programs in the world. The Tata Energy Research Institute

(TERI) estimates that an annual increase in investments of around 5 billion US Dollar is needed

between 2012 and 2017 to support a rapid transition to low-carbon energy generation. Mobilizing

these resources through the CDM would create a win–win outcome for energy supply in India and

global climate change mitigation.

Two further aspects are important with regard to the energy sector and potential CDM projects

promoting renewables: First of all the CDM should be seen as a financial incentive for clean energy

pilot projects that need to be scaled up if successful. However, successful implementation will then

heavily depend on effective coordination between the various ministries and agencies at the

national level and between the central government, the States and Union Territories, and

municipalities. The Prime Minister created an Energy Coordination Committee to adopt “a

systematic and coordinated approach to policy formulation and decision-making across the whole

energy field.”453 Beyond this, an Expert Committee for Formulate Energy Policy454 made policy

recommendations for energy security including the encouragement of renewable and local solutions.

447 See Herring / Bharucha 1998 for a detailed analysis based on India’s commitment in five global environmental treaties. 448 UNDP 2007: p. 133: Over the next 10 years, India is planning to increase its coal-fired electricity generation capacity by over 75 percent.” 449 Government of India 2004: p. iii. 450 UNDP 2007: p. 152. 451 Greenpeace / EREC 2008. 452 Government of India 2006: p. 89. 453 IEA 2007: p. 458.



5.1.3 Implementing CDM Projects in India455

At the end of December 2009 almost 2,000 projects were registered under the CDM globally.456 India

accounts for 477 of these projects (almost 24 percent) and is therefore the second most important

CDM host country after China and followed by Brazil. With expected average annual revenues of

40,191,351 CERs India has also the second greatest share with regard to GHG emission reductions

(about 12 percent) following China. 394 registered projects are from the energy sector. Project

registration however showed its peak in the second half of 2006 and the first half of 2007 with

significantly less projects being registered thereafter. Biomass utilisation, waste gas utilisation as

well as renewable energy projects were mainly implemented in India: Most activities are RE

projects such as biomass (29 percent of all registered projects), wind (20 percent), hydro (12

percent) and biogas (3 percent).

Both the central government and State authorities are involved in policies and regulations with

regard to the planning, construction and operation of CDM projects.457 With a National Action Plan

on Climate Change and a roadmap of economic development, the Indian government opened

different economic branches for CDM activities, including the energy sector that has “witnessed

regulatory reforms during the last decade.”458

The Indian DNA is the National Clean Development Mechanism Authority (NCDMA). It consists of six

ministries and agencies and a Planning Commission. Chairperson is the Secretary of the Indian

Ministry of Environment and Forests. Since its implementation in 2003 the DNA has approved 1,455

projects; currently 477 of them are registered. Project developers can get host country approval

letters within two months unless the project is rejected or has to be reconsidered. India’s SD

indicators stress the social (poverty alleviation), economic (additional investment consistent) and

environmental (impact on environment and natural resources) well being of the project as well as

technological benefits. Environmentally safe and sound technologies should be transferred to India.

454 Government of India 2006. 455 For an Indian CDM country profile, procedures and requirements, laws and regulations, financial issues and government incentives see IGES / Japanese Ministry of the Environment / Winrock International India 2005. 456 UNFCCC CDM Project Database: http://cdm.unfccc.int/Projects/projsearch.html [retrieved: 12.2.2010] 457 The general rules and regulations for the implementation of CDM projects in India follow the global CDM procedures as outlined in the CDM chapter in this paper before. 458 BMU / GTZ 2008 (a): p. 11.

Source: map based on data from the UNFCCC [16.12.2009] - (http://cdm.unfccc.int/Projects/MapApp/index.html)

> Figure 5.1: CDM Projects in India




The baseline scenario and the criterion of additionality are in accordance with general CDM rules

and regulations. At the State level, CDM promotion cells have been implemented. They support CDM

projects with information dissemination and enhance coordination between local and national

governments and authorities. Further capacity building is initiated by foreign donors like GTZ, ADB

and UNDP. The aim of these initiatives is to support the public and the private sector for

“preparation and implantation of internationally acceptable projects”459 under the CDM.

The Institute for Global Environmental Strategies describes a feature of the CDM in India which is

fundamentally different from the Philippines: Although capacity building is financed by foreign

investors and needed especially for training and to identify CDM locations, many CDM projects in

India are unilateral, which means that they have been developed without the financial and

technological involvement of any Annex 1 country. CERs are mainly bought by companies and power

generators from the EU or Japan where emissions trading systems are implemented. The following

chapter will examine some of these projects in the field of RE. The section will focus on barriers

mentioned in the CDM project design documents and further perspectives of these projects.

5.1.4 Renewable Energy CDM Projects in India: Barriers and Perspectives

The final chapter about the energy sector and RE CDM projects in India will now concentrate on the

empirical data available from registered CDM projects. It will investigate the barriers identified by

the project participants and its impact on the promotion of SD. Before we are going to examine a

sample of CDM projects we will summarize general political and economic barriers for RE in India -

although they are always very site-specific and may vary from case to case.460

“Barriers include subsidies for conventional forms of energy, high initial capital costs coupled with lack of fuel-price risk assessment, imperfect capital markets, lack of skills or information, poor market acceptance, technology prejudice, financing risks and uncertainties, high transactions costs, and a variety of regulatory and institutional factors.”

Renewable energy technologies (RET) remained marginalized for a long time in the Indian energy

scenario. Due to high investments in coal and oil in the mostly centrally planned public sector there

was no political long term planning or commitment for renewables. Most projects lack economic

feasibility as well as investment attractiveness and were supported mainly because of social and

environmental benefits. Financial barriers such as subsidies for competing fuels, high initial capital

costs and unfavourable power pricing rules are critical constraints to the dissemination of RE:

“In India power tariffs are highly underpriced and subsidized, especially for the rural sector and in some notified industrial areas. While considering cost benefits of RETs such direct subsidy on cost of power and indirect subsidy by way of subsidy on freight and coal are never calculated and hence conventional power costs are always more attractive and affordable than RETs.”461

Consequently, RE projects face certain market barriers, such as sceptical banks and a lack of access

to credits or missing technical and commercial skills as well as information deficits. There are also

fundamental political barriers for RE. India lacks a legal framework for independent power

producers as well as transmission access for RE projects. Restrictions with regard to sites and

459 NCDMA 2009. 460 See for a detailed analysis: Beck / Martinot 2004. (www.martinot.info/Beck_Martinot_AP.pdf) 461 Ministry of Non-conventional Energy Sources, India 2001.

http://www.martinot.info/Beck_Martinot_AP.pdf



construction can also be observed. The amount of different government agencies and institutional

structures represents a further barrier for RE – with competing authorities both at the national and

the State level.

“There is duplication, overlapping and lack of co-ordination in the implementation of renewable energy programmes. A bureaucratic structure with a target oriented approach has led to rigidity in instructions and a centralized planning process is virtually choking the growth and spread of RETs.” 462

A study about solar-water-heater and wind energy reveals further social and technical barriers such

as missing technical expertise as well as a lack of awareness, knowledge and information about the

potentials and the availability of the technologies among political authorities and consumers.463

We will now investigate a sample of 50 different RE projects based on the barrier analysis and

comments on SD benefits in every project’s PDD. Four criteria guided the project selection for the

sample: Projects that were selected got registered at different points of time since the CDM exists

(date of registration), they are located in several states all across India (regional distribution),

small-scale and large-scale CDM projects are included (size) as well as a mix of solar, wind,

hydropower, biomass and biogas activities (kind of RE source).

Wind power projects under the CDM: Although several project proponents describe the

development of the wind energy sector as insignificant compared to the increasing energy demand,

most registered RE projects in India are either wind or hydropower activities. Wind power often

faces no significant technical barriers as technologies like wind turbines are already available in

India. Political barriers exist, e.g. inconsistent tariff regulations from state to state, unavailability

of transmission capacity, grid authorities delaying the payments or policy changes.

“Government policies to support renewable energy project have been irregular. It has been seen in past that states have curtailed a policy after declaring it. Irregular policy changes lead to uncertainties in revenue generation and thus more project risk.”464

Hydro power projects under the CDM: Inconsistent implementation of national policies are also a

problem for hydropower projects. In one case, the Electricity Regulatory Commission in Punjab

State refused to purchase power from mini hydro projects at a certain price set by the national

government.465 Furthermore, royalties to the local government are common for hydro CDM projects:

“Project proponents need to pay royalty charges to the Govt. of Himachal Pradesh for utilising water resources from the stream. The royalty charges may be subjected to revision from time to time. Hence, there is an uncertainty with regard to the operational economics of the project. Any upward revision will seriously affect the project’s viability.”466

The share of electricity from small hydroelectric projects in India’s total installed capacity is very

small. Large and medium scale projects dominate the hydro energy sector with no independent

power producer in several States. Small scale projects are mostly implemented in rural areas with

benefits for the local population. Some of them claim to be “amongst the first of its kind in the

462 Ministry of Non-conventional Energy Sources, India 2001. 463 Reddy, Dr. B. Sudhakar 2001: pp. 69ff. The majority of consumers is not aware of savings and advantages from RE technologies. 464 PDD: http://cdm.unfccc.int/UserManagement/FileStorage/9GR2YTX65NEH2H6EW56XTP07BXFO81 [retrieved: 12.2.2010], p. 11. 465 PDD: http://cdm.unfccc.int/UserManagement/FileStorage/6GVTIXG6WG6BV447QAYDSB61PRKDH8 [retrieved: 12.2.2010] 466 PDD: http://cdm.unfccc.int/UserManagement/FileStorage/FS_319274267 [retrieved: 12.2.2010], p. 16.

http://cdm.unfccc.int/UserManagement/FileStorage/9GR2YTX65NEH2H6EW56XTP07BXFO81

http://cdm.unfccc.int/UserManagement/FileStorage/6GVTIXG6WG6BV447QAYDSB61PRKDH8

http://cdm.unfccc.int/UserManagement/FileStorage/FS_319274267



country”467. Due to previous experiences the local population thinks that a hydro project eventually

results in land inundation and displacements. Consequently, opposition against the installation of

run-of-the river hydropower projects exists, although they might not involve any displacement.

Biomass projects under the CDM: Certain political barriers also hamper biomass projects that are

mostly implemented in rural agricultural areas with huge biomass potentials. Against the provision

of the national Electricity Act to make it obligatory to produce 10 percent of total power

consumption from renewables, there remain policy implementation deficits. The Electricity

Regulatory Commission in Uttar Pradesh kept its limits to five percent. Fluctuation in prize and

availability as well as challenges with handling and storage of biomass lead to further costs and

uncertainties about profitability. All projects from the sample used indigenous technologies and did

not involve any technology transfer.

Biogas projects under the CDM: A variety of barriers exists for biogas projects, especially with

regard to methane extraction. For example, waste treatment is often not applied because it is too

expensive and there are no incentives and regulations promoting it. In addition to that, cheap

firewood is available as a source of energy for farmers, who are not aware of biogas and do not see

any need for it. Information and training is a challenge for these projects. Various biogas projects

involve new technologies and claim to be the “first of its kinds” in India.

Solar power projects under the CDM: Only very few solar projects are registered under the CDM in

India – including community kitchens and similar solar steam applications in various regions of the

country. Projects face high investment and financial barriers. For example, people below the

poverty line benefit from photovoltaic lightning projects (substituting kerosene lamps), but they can

hardly afford this new kind of technology on their own. Solar power projects might promote

sustainable development, but that does not result in additional financial revenues.

Empirical findings from the Indian CDM project sample is coherent with findings about certain

barriers identified by the German Federal Ministry for the Environment:468 A study by the ministry

shows a lack of coordination and integration of policy, uneven subsidies and tax structures

preferring fossil fuels, unclear legal environment and a lack of standards for implementing RE

projects. Of course, all Indian CDM projects in the sample claimed investment barriers, as this is

mandatory by the CDM rules and regulations. Further barriers exist on the technical, political and

(to a less extend) on the social level. Almost half of the projects criticize the political environment

with regard to unforeseen policy change, varying tariff patterns or a lack of policy implementation.

Four projects skipped the detailed barrier analysis and focused on financial barrier only. Finally,

most wind and hydropower projects do not involve any kind of technology transfer as the

technologies are produced in India already.

To what extend do the projects promote Sustainable development? All projects mitigate GHG

emissions as it is the basic criterion to get approved as a CDM project. The vast majority of the

projects also claims general benefits for the environment and the livelihood of the local population.

467 PDD: http://cdm.unfccc.int/UserManagement/FileStorage/XSO665NIFTVG6BRSRS98VGT4789TVE [retrieved: 12.2.2010], p. 3. 468 For a detailed barrier analysis see BMU / GTZ 2008 (a): pp. 36ff.

http://cdm.unfccc.int/UserManagement/FileStorage/XSO665NIFTVG6BRSRS98VGT4789TVE



However, further political and technological impacts are relatively rare. Still, 13 projects (four out

of five biogas activities of the sample) claim to be pilot projects to demonstrate general feasibility

in India. Eight projects involved capacity building and training, four stated their ambition to

stimulate growth of RE in India. Out of 50 projects, not a single one involved technology transfer.

All this leads to several conclusions that will be discussed in the synthesis of this chapter. The

following figure gives an overview on the barriers of RE and how the CDM helps to overcome them.

5.2 Promoting Renewable Energy through the CDM in China

Similar to the Indian case the structure of this chapter about the CDM in the People’s Republic of

China will also closely follow the Philippines’ case study. It will first examine the general framework

conditions for RE projects in China focusing on policy, polity and politics, before investigating the

situation and implementation of CDM projects in the country and finally having a closer look at

specific barriers and perspectives of RE CDM project activities in China.

According to the Human Development Report China reflects a medium human development similar

to India. It ranks on position 81 out of 177 countries with an HDI value of 0.777 (a constant increase

from 0.530 in 1975) and a per capita GDP of 6,757 USD.469 With a size of 9.6 million km2 and a

population of about 1.4 billion China has a significant impact not only on world politics and

economics, but also on international climate negotiations. China is already the biggest emitter of

total greenhouse gases responsible for almost 21 percent of worldwide GHG emissions.470 However,

historical and per capita emissions are far below industrialized countries.

469 Data in this chapter based on Government of the People’s Republic of China 2004 and 2007. 470 Total emissions in 2004: 5,007 million tons of CO2 / per capita: 3,8 tons (according to UNDP 2004) / “With the world’s fastest growing economy, one fifth of its population, and a highly coal-intensive energy system, China occupies a critical place in efforts to tackle climate change.” (UNDP 2007: p. 151)


> Figure 5.2: Wilkins’ Analytical Framework Applied to India

Laws to promote RE exist, but often lack concrete targets. Implementation deficits and policy

inconsistency between national and State legislation can be observed due to strong States.

Some CDM projects claim to be pilot projects and involve training and

education. Projects often do not lead to further action.

Social freedom is guaranteed. However, ethical conflicts also challenge CDM

projects. There is a lack of awareness for biomass and small hydro projects.

Investment barriers are mostly minimized or eliminated by

the CDM. Still there are financial barriers to RE, such as various

tariff and policy change in a state dominated energy sector.

SD benefits do not result in additional

revenues.

Some technical barriers are reduced with the help of the CDM. However, technology and knowledge transfer is very rare /most wind projects without foreign technologies.

cost efficiency


capital costs

There are good natural conditions for various RE sources, but a lack of political action and incentives to promote RE - both on the national and the State level.



“Rich countries dominate the overall emissions account. Collectively, they account for about 7 out of

every 10 tonnes of CO2 that have been emitted since the start of the industrial era. [...] Historic

emissions amount to around 1,100 tonnes of CO2 per capita for Britain and America, compared with 66

tonnes per capita for China and 23 tonnes per capita for India.”471

Climate change confronts China above all with two challenges: adaptation and mitigation. China

already registers highly damaging climate change impacts like extreme weather events, droughts

and flooding. Mitigation is therefore in China’s own interest. However, it is seen as the most

difficult task to “change the emissions trajectory in a high-growth economy without compromising

human development.”472 To understand the Chinese position on climate change we will first look at

China’s Initial National Communication on Climate Change to the UNFCCC that has been prepared

by the National Coordination Committee on Climate Change (NCCC).

China describes itself as a “low-income developing country with a prominent disparity in economic

development in different regions”473 that leads to ambitious SD goals in terms of economic

development, similar to India. China’s position underlines that this kind of SD and the contribution

of the country to global climate change mitigation can only be achieved with foreign support:

“Analysis shows that on the one hand, the growing need for daily necessities and economic development in China in the future will result in more GHG emissions, whereas on the other hand the implementation of a sustainable development strategy will enable China to do its best within the limit of its capacity and development level to reduce the growth rate of GHG emissions.”474

China is nevertheless aware of the impacts of climate change on the country, especially on water

resources, agriculture, terrestrial ecosystems and the coastal zones. Chinese studies show that

extreme hot temperature events are likely to increase as well as droughts and flooding and a

dramatic shrinking of glaciers, constituting a “national ecological security crisis of the first

order.”475 More flooding is likely due to increased flows of water from ice melt. In the long term,

communities in the mountains are going to lose their source of water. Other simulations indicate

that food production might decrease by 10 percent until 2050 due to climate change. Certain

models project sea-level rise over different coastal zones between 31 and 65 cm by 2100. China is

among the ten countries most affected by climate change according to the Germanwatch Climate

Risk Index 2010 with an average annual death toll of 2023 people between 1990 and 2008.476

Since the 1980s, the Chinese government has carried out a series of reforms, policies, regulations

and measures in the energy sector to promote RE, optimize the energy structure and promote the

technical progress. However, the country’s energy demand still heavily relies on coal and fossil

fuels. China therefore promotes technical cooperation and extensive exchange with other countries

in the field of climate-friendly technologies such as RE. In cooperation with the World Bank, UNDP

and other organizations certain clean energy projects such as Capacity Building for the Rapid

Commercialisation of Renewable Energy in China have been implemented. A Climate Change Info-

Net477 functions as a source for domestic action, laws and regulations, and other information on

471 UNDP 2007: p. 41. 472 UNDP 2007: p. 151. 473 People’s Republic of China 2004. 474 People’s Republic of China 2004: p. 4. 475 United Nations Development Program (UNDP) 2007 (a): p. 97. 476 Burck, Jan / Bals, Christoph / Rossow, Verena 2009. 477 National Development and Reform Commission (NDRC) 2009.



climate change. Despite the high number of political incentives enumerated by the Chinese

government the country has a “very weak” performance according to the Germanwatch climate

protection index 2010478 - especially due to the negative trend of GHG emissions. China’s emissions

have more than doubled between 1990 and 2004 to more than 5,000 million tons of CO2

equivalents.479 Nevertheless, Germanwach acknowledges China’s political commitment and its

constructive role in international climate negotiations. Yet, it remains unclear, if China’s pledges

will lead to concrete political action. China plans to reduce GHG emissions between 40 and 45

percent by 2020 compared to 2005480. As a country “with a relatively low level of economic

development and insufficient capability of technology development”481 China expresses further

needs for funds, technologies and capacity building in its initial statement to the UNFCCC.

5.2.1 Potentials and Framework Conditions for Renewables in China

This chapter will first examine the general potentials for renewables in the People’s Republic of

China (A) before investigating possible barriers for RE projects. As done in the cases of the

Philippines and India, we will then focus on the political (B), economic (C), and social (D)

dimension. China’s position on climate change, challenges, principles and objectives, policies and

measures are found in the country’s National Climate Change Programme.482

(A) Potentials for renewable energy in China483: In 2008 China produced almost four times more

energy than 30 years before. Today, China is considered to be the second largest energy producer

just behind the USA. By the end of 2008, the installed capacity of power generation reached 792

GW. The share of installed capacity of RE has increased from 14 percent in 2005 to 17 percent in

2008. Yet, the share of wind, hydro and solar power at the total energy supply is relatively small.

The total wind power installation in China has reached 12,152 MW in 2008 with an annual growth

rate of more than 100 percent over the last years.484 Technically available resources in China are

between 253 GW and 297 GW. The solar industry shows similar potentials. With regard to biomass

the total installed power capacity had exceeded 3,136 MW in 2008. This is far below its potential: In

2006 about 235 million tons, or 32 percent of total crop straws, were left unused – equivalent to a

power production of 235 billion kWh.485 The Renewable Energy Policy Network describes the energy

development in China as “far from balance between different technologies.”486 While targets for

wind and solar energy for 2020 are likely to be overtaken, barriers remain especially for biomass.

478 Burck, Jan / Bals, Christoph / Rossow, Verena 2009. 479 UNDP 2007. 480 Article in “Xinhuanet” from November 26th 2009: “China announces targets on carbon dioxide emission cuts” (http://www.ccchina.gov.cn/en/NewsInfo.asp?NewsId=20831) [retrieved: 12.2.2010] 481 Government of the People’s Republic of China 2004: p. 16. 482 Government of the People’s Republic of China 2007. 483 See for data in this section Renewable Energy Policy Network for the 21st Century (REN 21) 2009: pp. 9ff. For a detailed analysis see also IGES / Ministry of the Environment, Japan / CREIA 2005: pp. 47-58. 484 The wind turbine manufacturing sector is experiencing rapid development. A high number of manufacturers emerged within a short period of time. There are 70 wind turbine manufacturers under planning and expect to have a capacity of over 30,000 MW per year by 2010. 485 Renewable Energy Policy Network for the 21st Century (REN 21) 2009 (a): pp. 47ff. 486 Renewable Energy Network for the 21st Century (REN 21) 2009 (a): p. 93.

http://www.ccchina.gov.cn/en/NewsInfo.asp?NewsId=20831



(B) Political framework conditions:487 Following a civil war between republicans and communists

the People’s Republic of China was founded in 1949 under communist rule. Since then the state is

led by a communist party with a constitution from 1982 and severe political problems:

“Although environmental regulations exist, they are not embedded in a strong legal system. Power in China ultimately resides in the hands of individuals, not institutions, and the judiciary is not autonomous. Enforcement of environmental regulations is problematic and subject to corruption.”488

The government is dominated by the Chinese Communist Party (CCP) with more than 73 million

members - the biggest party in the world. Compared to India, China’s institutions lack democratic

legitimacy, and the country is generally considered to be an authoritarian system without

democratic elections and restricted freedoms.489 However, political decision-making is based on

cooperation and coalitions that involve various actors in the process of policy making.

“Central leaders must increasingly build consensus for new policies among party members, local and regional leaders, influential non-party members, and the population at large. In periods of greater openness, the influence of people and organizations outside the formal party structure has tended to increase, particularly in the economic realm.”490

Nevertheless, autonomous organizations opposing party rule cannot be established and all political,

economic and cultural institutions are monitored by party committees. Party control is tighter in

urban economic settings than it is in rural areas. Representatives from 31 provinces, autonomous

regions and province-level cities are in the National People’s Congress (NPC) - the 2,985 seat-

legislature and highest organ of state power. Consequently, consensus is important for political

success and effective implementation on the local level: “Chinese authorities describe the political

process in China as one based on consensus-building: support must come from below in order for

directions from above to take effect.”491

The party's highest body is the Party Congress, which meets at least once every five years. The 17th

Party Congress took place in 2007. The Chinese government implements party policies and is

subordinated to the CCP. Under the Chinese constitution, The NPC meets annually to review and

approve major new policy directions, laws, the budget, and major personnel changes. When the

NPC is not in session, its permanent organ, the 153-member Standing Committee, exercises state

power. Head of state is the President. China also brought openness into its legal system in 1994.

Since then citizens are allowed to sue officials for abuse of authority or malfeasance. According to

the constitution even party leaders are held accountable under the rule of law – at least in theory.

From a theoretical perspective China seems to be much more centralized than it is actually the

case. Implementation varies greatly from province to province and a number of administrative

authorities even within the provinces are involved. When it comes to environmental agreements

implementing agencies fulfil the procedural requirements of the treaties, but fail to manage and

monitor regional and local compliance due to missing resources.492 Certain projects are also

implemented locally without permission from the central government – often to test reactions. The

487 U.S. Department of State 2009 (b). 488 Oksenberg / Economy 1998: p. 355. 489 For a more detailed characterisation see Hartmann, Jürgen 2006. 490 U.S. Department of State 2009 (b). 491 IEA 2007: p. 244. 492 Oksenberg / Economy 1998 investigate China’s commitment to five international environmental treaties.



central national government rules the country in a less powerful way than expected from the

political and constitutional setting. China even uses and learns from best-practice experience to

expand it on the national level, showing bottom-up learning effects.493 The provinces in China are

characterized by a huge variety of social, political and economical disparities. Their autonomy is

bigger than their structures might suggest. Although they implement central political decisions they

have ample scope for interpretation and their own interests. Corruption plays an important role

both on the national and the sub-national level in China. Corruption can be observed especially

among local bureaucrats who are far away from central government. It is a deciding factor for

foreign investors when it comes to project planning and implementation.494

(C) Economic framework conditions:495 China is among the countries with the greatest economic

potential in the world and its rapid economic growth is “overwhelming even the most serious efforts

in environmental protection.”496 Since 1953 National five-year plans have been initiated and

implemented resulting in enormous economical growth. Although elementary socialist market

economy mechanisms have been established (especially within the 15 free trade zones of the

country), the Chinese economy consists of state-owned and private sectors that develop together,

with the state-owned sector holding the majority,. China’s GDP was 4,326 billion US Dollar in 2008

or 15 percent of the global GDP, but with a per capita GDP of 2,940 US Dollar in the same year,

about one quarter of the OECD average. With its share of 49 percent in 2004 the industry has been

the main driver fir economic growth, followed by the service sector (39 percent) and agriculture (12

percent). To increase productivity and living standards all over the country, China combines central

planning with market-oriented reforms:

“The market-oriented reforms China has implemented over the past two decades have unleashed individual initiative and entrepreneurship. The result has been the largest reduction of poverty and one of the fastest increases in income levels ever seen.”497

The central government and the Communist Party still retain powers of key actors and enterprises

in various key branches like the energy sector. At the same time the private sector has grown over

the past 25 years and “state enterprises have gradually become more managerially independent and

authority over smaller enterprises has been devolved to local governments.”498

In 2003 the Chinese Communist Party's Third Plenum proposed several amendments to the state

constitution, including the protection for private property rights, the protection of the environment

and improving social equity. Because industry and construction account for about 46 percent of

China's GDP, environmental impacts are enormous.499 Increased pollution and degradation of natural

resources are only two negative effects of China’s economic development. Rapid growth also leads

to a high demand for energy, expected to grow over 4 percent a year through 2030 with coal as the

main source of energy (70 percent in 2005). Since the 1990s, China has allowed foreign investors to

manufacture and sell a wide range of goods in China, and authorized the establishment of foreign-

493 For more information about the implementation of policy see: Harmann, Jürgen: pp. 105 ff. 494 For more information about corruption in China: Hartmann, Jürgen 2006: pp. 91 ff. 495 Data in this chapter mainly from World Bank 2009 (b). 496 Oksenberg / Economy 1998: p. 354. 497 U.S. Department of State 2009 (b). 498 IEA 2007: 245. 499 Major industries are mining, iron, coal, machinery; textiles and various consumer products.



owned enterprises. However, barriers still exist such as “inconsistently enforced laws and

regulations and the lack of a rules-based legal infrastructure.”500 Foreign enterprises produce about

half of China's exports, and China attracts large investment inflows. China's economic growth and

reforms since 1978 have improved the lives of hundreds of millions of Chinese – also with regard to

social mobility and personal freedom, employment opportunity and housing choices, educational

and cultural pursuits as well as access to information. However, numerous severe concerns remain

with regard to several social topics and human rights issues.

(D) Social framework conditions:501 China is the world’s most populous country with enormous

pressure on its social and economic situation. China tries to control population growth with a strict

birth limitation policy. The Chinese government guarantees a free 9-year education which is not

properly enforced yet. The literacy rate is 93 percent among adults. Poverty combined with high

income inequality remain major concerns especially in rural areas where almost 17 percent of the

population lives below the poverty line of one USD a day according to the World Bank. China’s

human rights situation is also critical. Organizations like Human Rights Watch accuse Chinese

authorities not to guarantee fundamental rights and freedoms “particularly as the government

continues to control and direct judicial institutions and decisions.”502 Critical journalists face

restrictions and censorship; human rights activists are strictly controlled by the government and

exposed to arbitrariness; ethnic minorities are suppressed according to Human Rights Watch.

Environmental activists and grassroots organizations face intensified repression and punishment

from the government and local authorities. NGO activities, “especially those relating to the rule of

law and expansion of judicial review”503, are under continuous restriction.

5.2.2 The Energy Sector in China: Policy, Polity and Politics

The Chinese government has incorporated energy development and conservation plans into the

national economic and social development plans. In 2000, China identified concrete development

goals, key projects and principal policies for energy development and conservation.504 Under its

11th Five-Year Plan, the Chinese government has set a wide range of goals for lowering future

emissions505: Energy intensity should be reduced by 20 percent below 2005 levels by 2010, the

country’s largest enterprises are monitored through energy efficiency improvement plans, Carbon

Capture and Storage (CCS) technology should be developed and implemented, inefficient power

plants and enterprises should be retired and RE should be promoted. The implementation of these

plans will be challenging for the national government:

“In effect, a significant proportion of Chinese coal-fired power plant development is out of central government control, with local government not enforcing national standards. Similarly, there are very large gaps in efficiency between small enterprises and the larger enterprises subject to government regulatory authority.”506

500 U.S. Department of State 2009 (b). 501 Data in this chapter are mainly based on UNEP Risoe Center 2007 (b). and Human Rights Watch 2009. 502 Human Rights Watch 2009. 503 U.S. Department of State 2009 (b). 504 Government of the People’s Republic of China 2004. 505 See UNDP 2007: p. 151. 506 UNDP 2007: p. 151.



China still depends heavily on fossil fuels and coal-fired power generation is rapidly expanding. In

2006 almost 90 percent of new power-generation capacity was coal-fired and “China was building an

estimated two new coal-fired power stations every week.”507 Coal meets about 64 percent of the

country’s primary energy needs; the share for oil is at about 18 percent. Natural gas and the

country’s many large hydropower projects constitute only two percent each. Geothermal, solar and

wind energy together account for 0.2 percent.508 Both India and China show the tension between

national energy security and global climate security with coal at the heart of these tensions.

“Despite some successes in countering environmental damage from energy production and use, emissions of air pollutants in China remain very high and energy-related greenhouse gas emissions are rising rapidly. Strong policy action is still needed to address these issues.”509

RE policies and regulations in China are diverse and differ from energy source to energy source. In

2005 the Chinese government issued the Renewable Energy Law510 as an umbrella framework and set

a national target to produce 17 percent of primary energy from renewable sources by 2020 with the

help of financial incentives and subsidies.511 This would mean to double its share of renewable

energy with hydropower as the main source and ambitious goals for wind power and biomass.512

“The Renewable Energy Law [...] serves as a milestone for elevating renewables to a strategic position in China. It provides the framework for legislative initiatives designed to secure the future development of renewable energy. The goals of the law include increasing the domestic energy supply, optimizing the energy structure, ensure energy security, protecting the environment, and realizing sustainable development of the Chinese economy and society.”513

A series of matching detailed rules and regulations were issued after the Renewable Energy Law has

been enacted. The Renewable Energy Policy Network514 comes to the conclusion that RE

development receives high political support. Restraining factors, such as missing subsidy schemes,

insufficient investments in research and development, a lack of support from grid companies and

unclear targets for solar power remain. The Global Renewable Energy Database515 lists 17 RE

policies and measures in China since 1995. A variety of Chinese laws encouraged the development

and utilization of RE even prior the Renewable Energy Law. The Electric Power Law was enacted in

1995 to promote and develop the electric power industry,516 the Energy Conservation Law from 1997

507 UNDP 2007: p. 133. 508 See Annex 15 for China’s total primary energy supply. 509 IEA 2007: p. 261. 510 National Development and Reform Commission (NDRC) 2009: The Renewable Energy Law of the People's Republic of China (www.ccchina.gov.cn/en/NewsInfo.asp?NewsId=5371) [retrieved: 12.2.2010] 511 Renewable Energy Policy Network for the 21st Century (REN 21) 2009 (b) p. 18: “Chinese fiscal support schemes can be divided into subsidies, tax policies, pricing schemes, and a reward scheme for green production.” 512 UNDP 2007: p. 151. By 2000, hydropower stations in more than 1,500 Chinese counties some 40,000 rural hydropower stations had been developed with the total installed capacity of 24.8 GW and generating about 80 billion kWh of electricity per year. In addition to wind power and small-scale hydropower stations, China has energetically popularized firewood- and coal-conservation stoves, biogas, solar energy and geothermal technologies in rural areas. From 1994 to 2000 the utilization of RE increased from 10.26 million tons to 33.57 million tons of coal equivalent. 513 Renewable Energy Policy Network for the 21st Century (REN 21) 2009 (b): p. 19. The law identifies four schemes to guide RE development in China: Additional costs for renewables are shared by end-users nationwide (“cost-sharing scheme”), a fixed amount is being added to the price for all renewables connected to the grid (“feed-in tariff scheme”). Grid companies are furthermore forced to buy all electricity generated from renewables under any condition (“mandatory grid-connection scheme”), a target for renewables of 10 and 15 percent is set for 2010 and 2020 respectively (national target scheme). 514 REN 21 2009: pp. 93-94. 515 International Energy Agency (IEA) 2009. See Annex 10 of this paper for an overview. 516 National Development and Reform Commission (NDRC) 2009: Electric Power Law of the People's Republic of China. (www.ccchina.gov.cn/en/NewsInfo.asp?NewsId=5376) [retrieved: 12.2.2010]





formulates energy saving and efficiency plans and the Law for Prevention and Control of Air

Pollution was created in 2000 to prevent and control atmospheric pollution. All with little effect:

“These laws, however, provided little guidance on utilizing renewables, since at that time renewable energy comprised only a small part of the national economy and was considered only in the context of rural energy. The situation has changed since the inception of the national Renewable Energy Law.”517

RE regulation and legislation in China involves a number of different authorities and government

departments.518 Other stakeholders like the state-owned grid companies are also essential for an

effective implementation of any regulations promoting renewables.

“Policy implementation is a complex process, and it can be challenging to ensure that the interests and benefits of various stakeholders are reflected in the regulations to the maximum extent.”519

In addition to that the National Development and Reform Commission (NDRC) is responsible for

energy-related policy formulation.

“The NDRC has policy, regulatory and administrative functions, such as making development plans and issuing project approvals. The Energy Bureau within the NDRC takes the lead in formulating energy-supply policy, while other NDRC departments have responsibilities for energy efficiency, pricing and regulation of industrial sectors.”520

Further government agencies are involved in one or the other way: The Ministry of Water Resources

overseas hydropower projects, the Ministry of Agriculture is responsible for rural energy, including

RE development. The Ministry of Finance and the State Bureau of Taxation are closely engaged in

any reforms that involve financial incentives, and the State Environmental Protection

Administration regulates environmental standards. All in all “nearly everything that is decided in

Beijing must be carried out by the provincial and municipal counterparts of all these agencies. Local

capacities vary widely.”521

Both the central governments and local authorities are involved in the development and deployment

of renewables in China. Financial incentives originate from both levels.522 Subsidies include research

and development of RE equipment, construction of RE generation systems, electrification programs

for rural areas as well as support for rural households. The national government and certain

provinces support renewables with favourable taxation policies. However, “China lags behind most

countries in using tax measures to create incentives for renewable energy deployment.”523 Further

industry support involves local capacity building for RE manufacturing. To sell wind turbines in

China, at least 70 percent of the product costs must be covered locally.524 Consequently,

international wind turbine manufacturers were forced to set up factories in China. Although

considered to be a world leader in RE policy, China faces large challenges such as policy

517 REN 21 2009 (b): p. 18. 518 REN 21 2009 (b): p. 18. This includes the State Council (planning economic development), the National People‘s Congress (setting legislation), the National Development and Reform Commission (project approval and price-setting schemes), the National Energy Administration (coordination), the Ministry of Finance (fiscal support), the Ministry of Science and Technology (research and development), the Ministry of Construction (for trade and import/ export regulations), the Ministry of Environmental Protection (environmental impact assessments), the Ministry of Agriculture (rural energy deployment), and the National Bureau of Forestry. 519 REN 21 2009 (b) p. 19. 520 IEA 2007: p. 270. 521 IEA 2007: p.270. 522 REN 21 2009 (b): p. 20. 523 REN 21 2009 (b): p. 22. 524 Information from the Chinese Wind Energy Association



enforcement, research and development capacity, and a missing association for the RE industry.

China’s grid connectivity and electricity transmission also lag behind peak-hour supply for RE.

“Because renewables have accounted for only a small share of total electricity generation, there has been little incentive for grid companies to invest in innovation. Meanwhile, the economic recession has reduced electricity demand, which makes it even less interesting economically for utilities to invest in infrastructure to accommodate power generated by renewables.”525

5.2.3 Implementing CDM Projects in China

At the end of December 2009 almost 2,000 CDM projects were registered worldwide.526 China

accounts for 715 of these projects (almost 36 percent) and is therefore the most important CDM

host country with huge potential for mitigating GHG emissions in all sectors followed by India and

Brazil. With expected average annual CERs of 199,947,293 China has also the greatest share with

regard to expected revenues (more than 59 percent). Project requests showed its peak in 2008 with

significantly less projects being requested in 2009. Energy efficiency, RE, as well as methane

recovery and utilization are priority areas for the CDM in China. 614 projects of all registered

activities are within the energy sector. However, the largest share of CERs comes from projects

reducing HFC-23, a by-product of HCFC-22, which is a potent ozone-depleting gas that was largely

used for refrigeration. Cutting HFC-23 emissions costs less than 1 USD per ton of CO2-equivalent.527

The implementation of the CDM in China follows the general rules and regulations as outlined in the

CDM chapter above and is therefore similar to the procedures in the Philippines and in India. China

has seen a surge in CDM activity since the country passed its Interim Regulations for CDM in June

2004 and the Kyoto Protocol entered into force.528 China has undertaken efforts to develop CDM

capacity on the national, local and enterprise levels as the country sees the CDM as an important

component for an environmentally sustainable development.

“[China] has developed clear institutional structures and implementation strategies aimed at streamlining CDM procedures. A law on “Measures for Operation and Management of Clean Development Mechanism Projects” has been adopted, setting out priorities for CDM investment [...].

525 REN 21 2009: p. 26. 526 UNFCCC CDM Project Database: http://cdm.unfccc.int/Projects/projsearch.html [review: 31.12.2009] 527 IEA 2007. 528 See for Details: National Development and Reform Commission (NDRC) 2009: Key Information about CDM in China. (cdm.ccchina.gov.cn/english/NewsInfo.asp?NewsId=879) [retrieved: 12.2.2010]

Source: map based on data from the UNFCCC [16.12.2009] - (http://cdm.unfccc.int/Projects/MapApp/index.html)

> Figure 5.3: CDM Projects in China





The law also establishes general provisions, licensing requirements and institutional arrangements for project management and implementation.”529

The National Development and Reform Commission (NDRC) is the DNA of the country. Board

members also include the Ministry of Science and Technology, the Ministry of Foreign Affairs, the

State Environmental Protection Administration, the China Meteorological Administration, the

Ministry of Finance, as well as the Ministry of Agriculture. Every project developer submits its CDM

application to this National Board and normally receives the necessary letter of approval within two

months if the project is not rejected or should be reconsidered.530

Until November 1st 2009 about 2,232 projects were already approved by the Chinese DNA. The

National Board reviews CDM project activities and reports on overall progress in China to the

National Coordination Committee on Climate Change (NCCCC)531 which reviews national CDM

policies, rules and standards. CDM Service Centres have been initiated on the provincial level to

provide training and information on the CDM and assist CDM project implementation on the spot.532

All in all the central government approves or rejects a CDM project in a formal and standardized

way. However, especially technical and political barriers exist on the provincial and local level. As

it was done with India before, the following chapter will examine RE projects on the ground

focusing on barriers mentioned in the PDDs.

5.2.4 Renewable Energy CDM Projects in China: Barriers and Perspectives

We have investigated the energy sector in China as well as implementation rules and procedures for

potential CDM projects. We will now examine the promotion of RE through the CDM with a sample

of 50 PDDs. Let us first briefly summarize the main general barriers for RE projects in China: Grid

connection is a major problem for wind power due to its expansion in recent years. As construction

planning takes time, future barriers are expected.533 Grid is a restricting factor for wind energy. The

solar-water-heater industry is mainly hindered by three factors: Policies come from different

departments and partly compete with each other; a lack of well-developed technology exists as well

as market disorder and poor regulation. The barriers to biomass development in China are

constrains from feedstock, lack of marketing channel, and missing incentives.

The following empirical analysis will focus on a sample of 50 PDDs from RE projects dealing with

energy production from solar power, wind power, hydropower, biomass or biogas. A list of all

projects chosen for this research is provided in Annex 18 of this paper. This chapter provides an

overview on the main barriers for these CDM projects in China and their commitment to SD in order

to assess the effectiveness of the mechanism. The projects were selected out of 644 energy

industries related CDM projects in China according to the same criteria that have been used for the

Indian sample: date of registration, regional distribution, project size and the source of RE to give a

529 IEA 2007: p. 239. 530 The DNA is responsible for writing approval letters on behalf of the Chinese government and supervises the CDM projects. 531 Institute for Global Environmental Strategies (IGES) 2009 (c). 532 27 Semi-public “Provincial CDM Centres” have been set up with the help of foreign donor programmes in 2005. According to Schröder, M 2008 these centres increase awareness, but provide only little capacity building and indirect policy change. 533 Renewable Energy Policy Network for the 21st Century (REN 21) 2009: p. 20.



broad overview on RE projects in China. The sample is not proportional: The overwhelming majority

of RE projects in China are hydropower followed by wind. There are only a few solar and no

geothermal projects. Consequently, already existing technologies are promoted through the CDM.

We will now summarize the barriers mentioned in the projects’ PDDs. All kinds of barriers have

been found in one or the other PDD.534 However, most of project developers mentioned high

investments or financial risks as their key barriers. This is obvious, if the CDM is understood as a

market mechanism to overcome financial barriers in developing countries. Project proponents have

to prove financial unattractiveness of the project. Consequently, all PDDs claim financial barriers

and most of them concentrate exclusively on that issue without investigating any other obstacles:

“[E]mission reduction would not occur as the project is faced with investment, technology and price barriers, which prevent the implementation of the project in the absence of the CDM support.”535

a) Wind power projects under the CDM: All wind power projects claim financial barriers due to

high initial investments and much higher costs per kW installed than for coal and conventional

energy. Technology risks associated with wind power in China are also quite high due to technology

transfer and a lack of capacity on the ground for the technologies. However, technological obstacles

are mentioned even when all technologies (e.g. turbines) are produced in China. Existing laws and

regulations represent a barrier for several small scale projects. Most PDDs however skip the barrier

analysis, since their investment analysis has proven financial unattractiveness:

“Investment analysis has argued that the project is the economically less attractive than other alternatives without the revenue from the sale of CERs. [T]his PDD skips the barrier analysis.”536

b) Hydropower projects under the CDM: The same observation can be made for hydropower

projects. Only earlier projects made a detailed barrier analysis whereas projects from 2008 and

2009 concentrate on the investment analysis. Others face geology and hydrology risks. Small hydro

plants (SHP) are often in remote areas, where the prize for investments is high compared to coal.

These projects are therefore not common practice:

“Even in today’s China, it is uncommon to have privately financed, constructed and operated SHPs. The barrier created by the overly bureaucratic institutional SHP development framework, the relatively long preparation time of SHP feasibility studies and site selection limitations make it much easier to develop coal-fired plants [...]. Government development funds dedicated to SHP have declined steadily since their inception in the 1950s to the late 1990s.”537

c) Biomass projects under the CDM: Any biomass activity claims to face serious disadvantages

compared to coal and other fossil fuels because the amount of biomass depends on seasonal

fluctuation. Biomass projects are also implemented against prevailing practice: “Compared with a

low cost and well proven Chinese coal fired power plant, it is much more expensive and risky to

build and operate a biomass plant with same power generation capacity.”538 Since biomass power

534 According to Decision 4/CMP.1, Annex II, project participants should provide evidence that the project is additional by showing that the project activity would not have occurred anyway due to at least one of the following barriers: investment barrier (financially more viable alternative would have led to higher emissions; technological barrier; barrier due to prevailing practice or policy that would have led to implementation of a technology with higher emissions; other barriers. 535 PDD: http://cdm.unfccc.int/UserManagement/FileStorage/Q6MHV0O9DHQOFA9P6I9OPL01PLKD7O, p. 5. For all PDDs in this chapter: [retrieved: 12.2.2010] 536 PDD: http://cdm.unfccc.int/UserManagement/FileStorage/7HEJKO12BP3L5IMW0NTGYRDZ9U6QAX, p. 16. 537 PDD: http://cdm.unfccc.int/UserManagement/FileStorage/1UQRO022QTRCZ8K2HBC9MQORVSWE7H, p. 11. 538 PDD: http://cdm.unfccc.int/UserManagement/FileStorage/F6Q7D86HP143NUKXNXOTOKAYTEYN0Z, p. 25.

http://cdm.unfccc.int/UserManagement/FileStorage/Q6MHV0O9DHQOFA9P6I9OPL01PLKD7O

http://cdm.unfccc.int/UserManagement/FileStorage/7HEJKO12BP3L5IMW0NTGYRDZ9U6QAX

http://cdm.unfccc.int/UserManagement/FileStorage/1UQRO022QTRCZ8K2HBC9MQORVSWE7H

http://cdm.unfccc.int/UserManagement/FileStorage/F6Q7D86HP143NUKXNXOTOKAYTEYN0Z



generation has not yet been commercialized in China, skilled staff to operate the facilities is also

rare, as well as institutions in China providing necessary training.

d) Biogas projects under the CDM: Technological barriers also exist with regard to several biogas

projects. Technical problems with methane capturing from landfills has been stated in the PDDs,

but not always proven in a barrier analysis. Especially later projects from 2009 do not include a

detailed barrier analysis anymore and concentrate on financial obstacles only.

The Chinese RE project sample has shown only a few social or political barriers for the projects that

could be overcome with the CDM.539 Almost half of the projects that were examined (24) even

skipped a detailed barrier analysis. In addition to that, most wind and hydropower projects do not

involve any kind of technology transfer as the technologies are produced within the country. Of

course, all projects do mitigate GHG emissions as it is the basic criterion for approval, but how do

the projects promote sustainable development going beyond the concrete projects?

To what extend do the projects promote sustainable development? The vast majority claims

general benefits for the environment and the livelihood of the people especially in remote areas

(reducing pollution, higher air quality, creation of jobs, increase the quality of life).540 However,

further political and technological impacts are relatively rare. In a sample of 50 RE CDM projects

only two claim capacity building with training and education, seven see themselves as pilot projects

to demonstrate feasibility in China and four include technology transfer. CDM projects often refer to

overcome environmentally unfriendly prevailing practices to prove additionality. However, there is

a wide discussion about additionality especially for wind farms in China, leading to the conclusion

539 Schröder identifies two main barriers to the full usage of the potential RE projects under the CDM: “the cost-benefit ratio and the dilemma for CDM projects to proof their additionality.” (Schröder, M. 2007: p. 11) 540 Especially small-scale projects in remote areas claim to promote sustainable development and support the local economy as key benefits of the CDM project activities.


> Figure 5.4: Wilkins’ Analytical Framework Applied to China

Laws to promote RE exist – but are often not specific enough. Implementation on the local level is a further

barrier. Local authorities matter despite a strong central state.

CDM partly supports capacity building and pilot projects. Resistance partly occurs on

the local level.

Environmentalism and opposition to the national legislation in China is rare due to restrictions under the

communist regime.

Investment barriers are mostly minimized or eliminated by the CDM. It is identified as the key barrier. Compared to coal, RE

are massively disadvantaged and financially unattractive.

Technical barriers are reduced with the help of the CDM. However, almost no new technologies are transferred to China – especially with regard to wind and hydro projects.

cost efficiency

choice of location noise exposure etc.

capital costs

Good natural conditions for RE sources exist. Barriers are national and local political conditions and the energy sector, but are rarely raised in CDM PDDs which focus on financial barriers.



that some projects fail to prove additionality.541 If the CDM would lead to policy change and

promote SD by making certain practices mandatory, they would not be eligible for the CDM

anymore, because they are not additional. This seems to be a contradiction. A study by the German

Ministry of the Environment542 also comes to ambivalent conclusions with regard to SD:

“Given the huge size of China, CDM is still not a trademark for sustainable development all over China, which makes China the largest CDM market in the world. CDM projects are still concentrated in the East of China, which has generally a higher level of development than the West of China.”

At the same time the CDM has the potential to promote climate-friendly policy beyond the projects:

“[T]he CDM and international climate policy have reached China and have made a great investment for building institutional climate change policy, implementation of real action, and formulation of GHG emission reduction policies and incentives.”543

The following synthesis will summarize and compare the results from China and India to make final

remarks on the promotion of sustainable development of the CDM in these two countries. A

conclusion will then discuss the research questions of this work to come up with answers and further

ideas concerning the effectiveness of the CDM in the Philippines, India and China.

5.3 Synthesis: About the Effectiveness of the CDM in India and China

According to UNDP “International cooperation could open the door to wide-ranging win–win

scenarios for human development and climate change mitigation.”544 Industrialized countries should

therefore invest in low-carbon energy transitions in the developing world. This would also increase

the chance for developing countries to agree to emissions reductions. Both India and China heavily

depend on oil and coal. A switch to renewables in these two countries in transition through

cooperation would have an enormous impact on global warming.

“China and India are the emerging giants of the world economy. Their unprecedented pace of economic development will require ever more energy, but it will transform living standards for billions. There can be no question of asking them selectively to curb growth so as to solve problems which are global.”545

Barriers for RE development exist on the international, national and sub-national level. From a

project developer’s point of view developing countries lack sufficient capacity and initial

investment costs are high. Missing financial incentives are a further barrier.

“While the international climate security benefits of a low-carbon transition in the developing world may be substantial, the international financing and capacity-building mechanisms needed to unlock those benefits remain underdeveloped. [...] The international community has not succeeded in developing a strategy for investing in global public goods.”546

The CDM aims to change this, overcome barriers for RE sources and promote SD with concrete

projects – at least in theory. What are the practical experiences that derive from this work?

541 Matthieu Glachant et al. investigated CDM and non-CDM wind projects and found evidence “that wind projects in China that were registered as CDM projects before May 2008 are not genuinely additional.” (Glachant, Matthieu et al. 2009: p. 19.) Most projects are located in Inner Mongolia, a province already with favourable wind power policy since the 1980s. Both CDM and non-CDM projects face the same regulatory conditions and present very similar financial revenues. Consequently, the CDM would not be necessary to realize the projects. 542 Both citations from BMU / GTZ 2008 (b): p. 26. and p. 36. 543 BMU / GTZ 2008 (b): p. 36. 544 UNDP 2007: p. 147. 545 IEA 2007. According IEA India and China will account for 80 percent of the increase in global demand for coal until 2030. 546 UNDP 2007: p. 150.



The CDM primary works as a market mechanism to overcome investment barriers, but CDM

projects in India and China show a lack of technology transfer und further commitments.

China and India have good conditions for RE sources, especially for wind and hydro, but they cannot

compete with coal and the increasing energy demand. The final chapters about India and China

(5.1.4 / 5.2.4) already summarized the potential of the CDM to overcome barriers for RE. It is

obvious that several projects fully concentrate their analysis on how the CDM overcomes financial

and investment barriers. Technical, social or political obstacles are often not even discussed as an

investment analysis is considered to be sufficient to prove additionality. These empirical

experiences reflect the function of the CDM as a pure market mechanism. The CDM is an investment

opportunity, but it cannot promote major shifts in the energy sectors of India and China.

Different from the Philippines technology transfer in India and China is relatively rare. Especially

wind and hydropower technologies are manufactured, produced and expanded in the host countries.

Whereas wind power projects in the Philippines are highly uncommon and face several barriers like

scepticism and a lack of understanding for the technology, these barriers do not exist in India and

China, where several wind parks exist already. Consequently, the CDM does not need to overcome

barriers for RE projects in the same way in India and China as it was the case in the Philippines.

The CDM has only limited impacts on sustainable development in India and China. Strong

SD criteria might even have an adverse effect and represent a barrier for CDM projects.

Although, it might be challenging to evaluate the CDM’s impact on SD, because the criteria for this

term vary,547 the previous chapters revealed that the CDM basically acts as a market mechanism also

with regard to SD. It provides financial incentives for project developers to reduce GHG emissions,

but further local SD impacts are formulated very abstractly in the PDDs. Every host country is

encouraged to translate its own SD indicators into CDM approval criteria. The Indian DNA has done

so and most of the projects in the country describe the social, economic, environmental and

technological well being of the project according to the eligibility criteria published by the Indian

Ministry of Environment and Forestry. This is not the case for China, where a SD strategy based on

China’s Agenda 21 from 1994 and its five-year plans exist, but no specific criteria for CDM

projects.548 However, despite missing concrete SD criteria, China accumulates more CDM projects

than India. This fact suggests that strong SD norms can be a barrier for CDM projects themselves.

This is a severe contradiction to the fundamental objectives of the CDM. The Japanese government

even comes to the conclusion that “it is highly unlikely for host countries to advance its sustainable

development goals through the CDM.”549 This seems to be rational if project developers can choose

their location for investment globally and where additional costs for SD can be avoided. In theory,

547 See for this paragraph the Indian SD criteria in Annex 16 of this paper and for China: IGES 2005 (b). 548 China’s Program of Action for Sustainable Development in China in the Early 21st Century highlights six priority areas: economic and social development (poverty alleviation, employment, technologies and knowledge), resource, ecological and environmental protection (complement national economic and environmental strategy) and capacity building (with local co-benefits). China’s Measures for Operation and Management of CDM Projects in China from 2005 only states that CDM projects shall be “consistent with China’s laws and regulations, sustainable development strategies and policies.” Source: http://cdm.ccchina.gov.cn/english/NewsInfo.asp?NewsId=905 [retrieved: 12.2.2010] 549 Government of Japan 2006: Ch2-13.




cooperation between developed and developing countries in the area of RE holds the key to

combine global climate protection with SD benefits. Practically however, the CDM shows

fundamental deficits when it comes to promote SD. Is this also true for the third criterion of

effectiveness, the potential of the CDM to support political change going beyond concrete projects?

The CDM bears the potential to promote political change in China and India: It affects

national and sub-national polity and politics, but has only little impact on policy.

Although India and China vary greatly with regard to their political environment and constitution,

both countries face similar barriers and are equally attractive for the CDM. Their CDM market is

mature and receives political support. A strong institutional framework with new political

authorities has been established in both countries – including the sub-national levels (polity).

As it was shown above, most PDDs do not mention political or social barriers and focus on an

investment analysis. Consequently, there is only little direct impact of CDM projects on the political

environment as the intention for further steps to promote RE is already low. RE face several barriers

on the local level in India and China such as inconsistent policy enforcement. With the help of the

CDM progressive States in India and Chinese Provinces can overcome national barriers like the fossil

fuel dominated energy sectors and missing incentives for RE projects with the to demonstrate

feasibility of RE projects, raise awareness and foster bottom-up learning processes. Among the

project samples from India and China however only a few involved capacity building and awareness

raising that is necessary for change ways of political decision-making (politics).

Hundreds of CDM projects are running in India and China already, but their impact on national

energy supply is very little. They might however give incentives for RE legislation (policy). China

and India are among the first developing countries to propose RE targets.550 However, the CDM

reveals the same contradiction like in the Philippines: If the CDM would lead to policy change by

making certain practices mandatory, they would not be eligible for the CDM anymore. Wind projects

in China already fail to prove additionality, as non-CDM wind power projects face the same

regulatory framework are able to compete. The impact of the mechanism on stronger RE policy is

relatively low – especially when RE sources are already available without the CDM. The CDM boosts

competition among Indian States and provides incentives for the Provinces even in a centrally

planned country like China. Bottom-up learning and further political change is rare, as the project’s

impact on the overall energy production is extremely low. Miriam Schröder points out that national

policy is more important than incentives from the CDM for a shift in energy markets like in China:

“The deployment of RE in China and in other countries will not depend to a great extend on the usage of the CDM because it is financially contributing only little in comparison to investments needs for the energy infrastructure. Instead, the deployment of RE depends on an effective long-term governance for renewable energy exercised by an interplay of national governments and private actors.”551

The CDM is not able to provide the framework needed for sufficient financial and technology

transfer. It helps to overcome specific barriers, but translation of experience from the ground to

national legislation in India and China is not measurable.

550 India has proposed that by 2012, ten percent of annual additions to power generation would be from renewable energy; China has a similar goal of 5 percent by the end of 2010. Realization needs structural efforts going beyond single projects. 551 Schröder, M. 2007: p. 11.



6 Conclusion and Perspectives

“Impact assessment and policy developments are part of climatic change. It is not possible, or sensible, to pretend that, for example, demographic change, energy use, water resource, agriculture and forestry will not affect the assumptions underpinning the science of climatic scenarios. Social, economic and political forces are critical in all parts of the process. [...] It is clear that policy will drive climatic change.”552

Research about governance has revealed that domestic political factors influence an effective

implementation of RE projects in developing countries. This is also true for the CDM:

“[C]ertain context conditions regarding the socio-political framework indeed matter for the successful implementation of new renewable energy options. [...] In conclusion, local socio-political and historic framework factors matter for the establishment of new approaches such as the CDM and hence amount amongst other elements to determinative success factors for rural electrification through renewable energy options.”553

Political framework conditions are relevant for the implementation of global regimes countering

climate change. But to what extend do politics, polity and policy on the national and sub-national

level matter? How do they shape the effectiveness of an international regime? Experiences from the

Philippines, empirical data from India and China as well as ideas about a comprehensive theoretical

model have been discussed in this work. Based on this knowledge we will now formulate final

remarks and conclusions as well as challenges, problems and suggestions for further research.

The first part of this conclusion (chapter 6.1) will summarize our findings from RE projects in the

Philippines, India and China about their potential to overcome barriers for RE, support SD and lead

to political change in these countries. The second part (chapter 6.2) will then summarize the

various interactions between international, national and local political conditions and how they

influence each other. It will also answer the central research question about the impact of domestic

politics on the effectiveness of the CDM. The final part (chapter 6.3) represents a critical review of

this research. Major barriers will be discussed, as well as methodological problems and limitations

of the case studies. This paper will close with ideas for further research and final remarks.

6.1 Comparison: CDM Effectiveness in the Philippines, India and China

Research about compliance of international environmental agreements is based on a variety of

diverse and interrelated factors and indicators that affect the likelihood of compliance. The puzzle

looks even worse when it comes to effectiveness. This paper has concentrated on political factors,

but it is highly aware that their explanatory strength might be restricted.554 Measuring effectiveness

as a holistic term has always been a difficult task – because of the high number of explaining and

intervening variables as well as a lack of clear causal relationships.

552 Giambelluca / Henderson-Sellers 1996: p. 452. 553 Benecke, G. 2007 (b): p. 11. 554 Vogel and Kessler identify numerous factors (administrative capacity, adequate enforcement mechanisms and regulatory authorities to monitor enforcement, political environment including public opinion and NGOs, economical environment) that affect the likelihood of compliance or non-compliance in the US and the European Community. They draw the conclusion that “compliance is a complex and dynamic process. And the relative importance of any particular factor, or set of factors, is likely to vary from nation to nation, and from regulation to regulation. Moreover the significance of these factors must be understood dynamically. None is static: all have evolved and are likely to continue to vary over time, leading to changes in the extent of compliance.” (Vogel / Kessler 1998: p.37.)



“There is no simple and straightforward way to define effectiveness treated as a dependent variable or target of analysis. The indirect measures often employed in studies of regime consequences [...] are severely limited as indicators of effectiveness.”555

This thesis defined effectiveness in a broad perspective with the help of three major indicators: The

potential of the CDM to overcome barriers for renewable energy projects (1), promote sustainable

development (2) and lead to political change (3). This chapter is going to discuss the overall

effectiveness of the CDM based on the empirical data from this work. The Philippines will be

evaluated as the main case before findings will be reflected in the light of data from India and

China. The first sub-question of the research design functions as the starting point for this chapter:

Can the CDM be described as an effective global regime in the field of renewable energy with

effects going beyond concrete projects on the ground?

Hypothesis: The CDM can be more than a pure market mechanism with the potential to overcome

not only financial barriers, but also to support sustainable development beyond the actual project

activity on the ground and it can change the political environment of the host country.

The first impression of RE projects in the Philippines is positive: Experiences reveal several benefits

for the local population and the environment. The projects prove feasibility of uncommon

technologies and involve technology transfer. Yet, no spill-over effects in terms of widespread

implementation of RE technologies due to the CDM can be observed. The CDM remains restricted to

a few concrete projects and does rarely involve any further commitments to SD. Still, the

mechanism has the potential to push a development that goes beyond a few small scale projects.

The CDM minimizes and eliminates barriers for renewable energy projects not only on the

financial level, but also promotes technology transfer and capacity building – this however,

only to a small degree. Although ambitious political goals, laws and regulations to promote RE in

the Philippines exist, there is a lack of law enforcement and effective implementation. Moreover,

obvious contradictions to the promotion of RE can be observed, like incentives for a faster

exploitation of national gas sources or the privatization of the energy sector. Unclear

responsibilities in this complex vertical and horizontal political system lead to further political

barriers. However, the CDM has the potential to minimize, if not eliminate, barriers for renewables

in three areas: the capacity for new technologies on the local level, technical barriers and financial

/ investment problems especially for previously unknown pilot projects. Testing these experiences

in India and China reveals a different perspective: The majority of the projects that were examined

skipped a detailed barrier analysis and focused on financial barriers only, the overwhelming

majority of RE CDM projects in India and China are wind or hydropower projects that do not involve

technology transfer and are criticized not to be additional. Still, the CDM empowers capacity locally

and facilitates project development for potential investors. It creates a positive environment for RE

projects, but only to a very small degree. Moreover, there is only little evidence that the CDM

assists in the transition away from fossil fuels with the help of RE sources.556 RE projects

furthermore generate relatively small volumes of CERs and are also harder to prove to be additional

555 Young, O. 1999: p. 277. 556 See Pearson, B. 2005. Pearson is an energy campaigner for Greenpeace Australia Pacific. He combines the question of SD through the CDM with the mechanism’s potential to promote RE sources. He finally denies this question



in contrast to projects that capture or destroy GHG especially with a much higher global warming

potential.557 These concerns were raised only months after the Marrakech Accords were approved in

2001. Ben Pearson therefore describes the situation with the CDM at work as a fulfilled prophecy:

“[D]espite the rhetorical trimmings the CDM is a market, not a development fund nor a renewables promotion mechanism. [...] An increasingly frequent complain about the CDM [...] is that the CDM is not working in that it is not driving sustainable development and not funding renewables. But the real problem is conversely that it is working perfectly in doing what a market-based mechanism is designed to do: discover and direct funding to projects that will produce the maximum volume of carbon credits for every dollar invested.”558

CDM projects do promote sustainable development on the environmental, economical and

social level. However, experiences cannot be translated into national legislation. Sustainable

development in this research included the social (poverty alleviation, improved quality of life),

economic (local financial benefits, technology transfer) and environmental (reduction of GHG

emissions, preservation of local environment) benefits from the CDM. Previous studies have already

shown how the CDM fails to promote these dimensions with a project by project approach.559 In

2005 about 200 studies revealed that the CDM primary functions as a market-driven mechanism

where only carbon reductions, but not SD benefits are valued. Consequently, the conclusion was

drawn that the mechanism does “not significantly contribute to sustainable development” and

cannot achieve wider targets such as poverty alleviation.560 This is partly true for the Philippines,

where the CDM provides necessary incentives for previously unknown technologies such as wind

turbines. Yet, technology and knowledge transfer affects the local level, but remains almost

without any impact on national standards and regulations. Especially the case studies have shown

that CDM projects can promote SD only to a certain point. These projects are progressive, climate-

friendly and community supportive on the spot, but almost no spill-over effects with regard to

further similar projects or even stronger legislation can be observed.

SD benefits in India and China are even less obvious where the CDM has only limited impacts on SD

and basically acts as a market mechanism to overcome financial barriers. PDDs describe their SD

commitments in a very general way and China does not even provide specific SD criteria for the

CDM. This seems to be rational as project developers choose project locations globally and

therefore avoid countries with strict SD criteria leading to higher costs but no additional revenues

from the CDM. But how can SD criteria be fulfilled for example in China where no indicators exist to

measure the impact of CDM projects on SD? Strong concerns were raised in 2005 already:

“[T]he CDM is failing in its mandate to promote sustainable development, most notably by not financing projects that help in the long-term transition of developing country energy sectors towards renewable technologies. [The problem] stems from the CDM’s structure as a project-based market mechanism in which the search for least-cost carbon credits is the paramount consideration. This sidelines projects like renewables by not rewarding the multiple benefits they provide.”561

557 HFC-23 has a global warming potential of 11,700, methane equals 21. Consequently, for each ton of HFC-23 destroyed, 11,7000 credits (CERs) are created leading to a huge financial carbon revenue. In contrast, RE projects provide only low rates of return as they displace CO2 with a global warming potential of 1. See Pearson, B. 2005. 558 Pearson, B. 2005: pp. 249. 559 According to Olhoff, A., Markandya, A., Halsnaes, K., Taylor, T., 2004. CDM: Sustainable Development Impacts. Denmark: UNEP, UNEP-Risoe Center. 560 For a review of the litereature see Olsen, Karen Holm 2005. (www.cd4cdm.org/Publications/CDM&SustainDevelop_literature.pdf ) 561 Pearson, B. 2005: p. 247.

http://www.cd4cdm.org/Publications/CDM&SustainDevelop_literature.pdf



Conflicts between profit maximizing and SD goals are evident. The chances for DNAs to define

national SD criteria according to article 12 of the Kyoto Protocol have only little impact on the

sustainability of the CDM. DNAs have little to bargain as investors have a global choice of location

due to the scope of the CDM. Additional incentives are needed to increase SD impacts of the CDM.

Until now, SD is present at the jargon of all stakeholders, but there is no accepted definition for

this term - especially on the local level, where projects should be implemented. Due to varying

interpretations of SD, barriers to actually check and monitor SD impacts expressed in the PDDs and

a lack of information and comparable data from the implemented projects it is not possible to

quantify the impact of the CDM on the SD of the host countries that have been discussed here. Even

checklists and multi-criteria methodology with clearer indicators leave only unsatisfying results.562

As even the DNAs of the host countries especially in China, but also in India and the Philippines fail

to provide quantifiable indicators to measure SD, it is not surprising that the projects themselves do

not provide quantitative indicators of their expected impact on SD. As long as no SD indicators exist

under the CDM, it remains hard to determine its impact on SD.563

Finally, the CDM led to several changes in the political environment of the Philippines, as well

as in India and China – especially with regard to polity, but less in terms of policy and politics.

The CDM has changed the political environment in all three countries with capacity building, new

authorities and bureaucracy in the field of climate change and project implementation. The

mechanism also led to an enormous institutional framework for the promotion of RE projects in the

countries. At the same time, the impact of the CDM on decision-making processes and actual policy

change with supportive and advanced legislation remains very little. Quite the opposite is even the

case as the criterion of additionality prevents developing countries from further commitments:

Every single project has to prove that it could not have been realized without the CDM. Now, with

the new Renewable Energy Law in the Philippines it will be challenging for a number of projects to

prove additionality. Consequently any legislation promoting RE in the host country can be a threat

to potential CDM projects. The CDM eventually does not promote RE friendly policy; it does instead

represent a major barrier for further legislation. A switch to RE in India and China would have an

enormous positive impact on worldwide GHG emissions. This paper has shown that both India and

China have good natural preconditions for RE sources, but poor political conditions with barriers on

the national and local level. The CDM seeks to overcome these barriers for climate-sound

technologies. However, although the CDM market is mature and has strong political support, CDM

projects in India and China show a lack of technology transfer und further concrete commitments.

Political and social barriers are often not even discussed in the PDDs as an investment analysis is

considered to be sufficient to prove additionality. Consequently, there is only little direct impact of

CDM projects on the political environment towards further steps to promote RE. These empirical

experiences reflect the function of the CDM as a pure market mechanism. The CDM regime does

however raise awareness for RE technologies and proves feasibility of uncommon technologies.

562 The SouthSouthNord matrix tool is an example for a combined methodology. In this approach, qualitative values are assigned to each criterion based on selected quantifiable indicators. In the end this generates a total score for each CDM project as case studies show. See Satoguina, Honorat 2007 for reference. 563 See Castor / Michaelowa 2008 for an emprical analysis of this topic.



Hundreds of CDM projects are running in India and China already, but their impact on national

energy supply and its contribution to the countries’ ambitious RE targets is very little. They might at

least give incentives for RE policy in both countries that is just developing. The CDM cannot provide

the framework needed for sufficient financial and technological transfer. It has the potential to

overcome specific barriers especially for mature energy sources like wind or water, but translation

of experiences from the ground to national legislation is not measurable.

Conclusion: The CDM is an effective regime in terms of its capacity to overcome barriers for

RE sources, but lacks incentives for sustainable development and shows even contradictions in

terms of climate-friendly political commitments going beyond the specific projects. The CDM

has indeed the potential to be more than just a pure market mechanism and a financial incentive

for potential investors. Technology and knowledge transfer as well as capacity building on the local

level can be observed in some cases. On a small scale this has also positive effects on the political

framework. Still, there is also an obvious discrepancy between theory and practise concerning the

promotion of further commitments towards climate-friendly political action. Experiences from the

projects and discussions about the Renewable Energy Law in the Philippines show critical conflicts

between the CDM and national legislation. Instead of promoting RE the CDM even represents a

barrier for stronger legislation, as CDM projects are harder or even impossible to implement and

struggle to fulfil the criterion of additionality with a progressive Renewable Energy Law.

The CDM seems to have bigger potentials to promote RE sources in less developed countries

than in stronger countries in transition. However, as long as the CDM primarily works as a market

mechanism without any additional incentives for SD the more advanced countries that are already

attractive for foreign investments will benefit most. With the criterion of additionality the

mechanism creates even a serious contradiction between theory and practice. Cooperation between

developed and developing countries in the area of RE seems to be an obvious, urgent and relatively

easy to implement measure to fight global warming effectively. CDM projects demonstrate RE

feasibility in developing countries and encourage political authorities of the host countries to

implement RE projects. Any further commitment however is rare and the CDM shows fundamental

deficits when it comes to SD and political change beyond the actual projects.

> Figure 6.1 The Effectiveness of the CDM Regime


promotion

of sustainable development

overcome barriers for renewable

energy projects

changing the political

environment

effectiveness of the CDM

CDM projects promote the

ecological and social dimension of SD only to a small degree.

Moreover, pilot projects are rare and SD benefits are less clear in India and China

than in the Philippines.

The CDM overcomes financial and partly

technical barriers. Yet, the effects remain

restricted to the local level and do not go

beyond the concrete project activities.

The CDM raises awareness and promotes institutional capacity

building, but has an adverse effect on environmental policy.



6.2 Think Global, Act Local? Three Dimensions of Interaction

The absolute CDM potential of a country in terms of its emissions reduction potential is a deciding

determinant of a country’s competitiveness on the global CDM market. It is also an important factor

to explain the regional distribution of CDM projects. However, this thesis has argued and revealed

that it should not be considered to be the only one and that domestic politics matter. They can

either represent a barrier for CDM activities, or help to overcome barriers for CDM projects to

promote RE. This chapter will summarize the various modes and ways of interaction that influence

the process of implementation and consequently the effectiveness of the CDM regime. Let us first

answer the second sub-question before discussing the overarching research question of this work.

How do national and sub-national politics, policy and polity interact with the global CDM

regime and do they matter to promote the effectiveness of the CDM?

Hypothesis: The political environment of the host country does matter and represents a deciding

factor for successful project implementation and the effectiveness of the CDM regime. National CDM

authorities have a strong impact on the project activities to fulfil SD criteria and local political

conditions are vital for the implementation process.

Although domestic politics matter and are highly relevant for successful implementation, they

seem to be less relevant than expected to promote the effectiveness of the CDM regime. This

thesis confirmed the importance of domestic politics for an effective implementation of an

international regime like the CDM under the Kyoto Protocol. Still, the hypothesis is only partly true

as different political settings in India and China seem to have only little impact on the overall

performance of the CDM. Domestic politics are relevant for a successful implementation of projects

under the CDM regime, but have only little influence on its effectiveness as it was defined in this

paper. National authorities can introduce SD criteria, but their actual impact is relatively low.

Despite positive national CDM authorities in the Philippines, as well as in India and China

project implementation faces major barriers on the local level. These conditions and

authorities on the ground are partly relevant for the effectiveness of the CDM. Domestic does

not only refer to the national government and legislation, but also to local political framework

conditions in host countries. In the Philippines, project developers made positive experiences with

national regulations and authorities, but expressed concerns with regard to corruption and a lack of

awareness for renewables on the local level. Missing local support and corruption on the ground

prevented several potential CDM projects in the Philippines. Furthermore, awareness for RE

projects is relatively low and needs to be raised in every barangay by the project developer. This

costly and time-consuming process of implementation and persuasion of local officials needs to be

done over and over again, because national incentives cannot foster bottom-up learning processes.

Local officials represent a critical barrier for project implementation. National legislation could

promote these projects and make certain technologies mandatory, but stronger legislation would



lead to problems to get registered as a CDM project at the same time. Several project proponents

criticize a lack of national incentives to learn from the positive experiences on the spot and to

facilitate the implementation of similar projects nationwide.

The fundamentally different political settings and framework conditions in India and China seem to

have only little to no effect on the effectiveness of the CDM. Although India and China vary greatly

with regard to their political environment, constitution and structure, both countries face similar

barriers for CDM projects in the field of RE and are equally attractive for the CDM. However, the

national as well as sub-national political framework conditions are relevant for a successful

implementation of the CDM. Even in a centrally organized state like China the implementation of

CDM projects faces several barriers on the provincial and local level. The same accounts for India,

where severe political deficits can be observed on the level of the State. In India, also the

Panchayat play a significant role when it comes to implementation and social acceptance.

SD benefits like technology transfer should lead to additional revenues to strengthen the

effectiveness of the mechanism and increase the number of financially attractive developing

countries for CDM projects. Project developers conclude that the CDM is vital for the private

sector to receive credits, but SD represents only a positive side effect without any additional

revenues for participants. This criticism is also raised by environmentalists:

“If the CDM continues to function as a project-based market mechanism designed to deliver cheap carbon credits then sustainable development in the CDM will only ever be a rhetorical flourish, and renewables will be frozen out.”564

The role of carbon finance in general and the CDM in specific to promote clean energy technologies

at the needed and possible scale is still hard to measure.565 At least in India and China the share of

renewable energy CDM projects at the total national energy markets is extremely low. Still, the

mechanism bears the potential for a global distribution of climate-sound technologies as

experiences especially from pilot projects in the Philippines have shown. Providing additional

incentives for SD benefits and technology transfer under the CDM might be a practical way to

strengthen the effectiveness of the regime to promote climate-friendly projects and initiatives in

developing countries. The overarching approach should be “not to limit the playing field available

with developing countries.”566 To increase the effectiveness of the CDM, SD criteria need to be

specified and the climate-sound character of RE technologies must be recognised in a way that the

criterion of additionality is easier to fulfil for these projects. Project developers should have the

chance to include further criteria like technology transfer to prove additionality.

Various lessons can be learned from CDM projects on the ground to enhance the effectiveness

of the CDM regime. Experiences with the CDM from the local level as a testing ground can be used

not only for strengthening the CDM itself, but also to combine the mechanism with the demand for a

global technology transfer regime. Today, the CDM is far away from being a strong technology

transfer regime. Yet, environmentalists and scientists insist that it is “imperative that before going

into the next rounds of commitments, lessons are learnt from the implementation of the CDM, and

564 Pearson, B. 2005: p. 251. 565 See Nakhooda, S. 2008. 566 TERI 2008: p. 10.



the mechanism is strengthened further.”567 The CDM provides tools and raises awareness for action

against climate change in developing countries – at least on the mitigation side. The lessons learned

from implementing the CDM in the past years need to be internalized to make the CDM available to

more developing countries and to make it more efficient, meaning its potential to overcome

barriers for renewables, promote SD and lead to political change. All this needs active participation

of developed countries:

“[T]he CDM needs to help promote technology transfer so that large emission reduction potential can be achieved. This cannot be achieved without the active participation of Annex 1 parties willing to share know-how, especially of technologies that are important from a climate change perspective.”568

Based on figure 3.4 and the considerations from the theoretical chapter of this work about the

interactions between the local, national and international level under a global regime figure 6.2

above summarizes the empirical results from this work about the interplay between all three levels.

Eventually, all this leads to several conclusions referring to the central research question of this

work that should be repeated here:

How far can renewable energy projects under the Clean Development Mechanism and domestic

political conditions in the Philippines influence each other to promote the effectiveness of the

global CDM regime compared to experiences from India and China?

This paper examined various factors shaping effectiveness: the host country’s energy sector,

supportive policy to promote RE, the overall environmental performance and CDM infrastructure all

on the national level as well as local capacity and awareness, the number of authorities involved,

corruption and transparency on the ground. We encountered that all these variables interact with

the CDM regime in different ways. Apart from these factors, this paper revealed a high natural

potential for RE projects in the three CDM host countries.

The host country’s energy sector lays the basis for CDM project activity: The fossil-fuel

dominated energy markets in India and China offer various opportunities for CDM projects. Huge

emissions reduction potentials lead to huge CDM project activity potentials. Paradoxically,

567 TERI 2008, p. 4. 568 TERI 2008: p. 7.

national dimension

international dimension

local

dimension

The national political framework can support CDM project implementation, but has only

little effect on the effectiveness of the CDM.

Still, voluntary action has the potential to lead to stepwise political commitments, if the

CDM would not punish stronger legislation.


> Figure 6.2: Three Dimensions of Interactions under the CDM Regime


Bottom-up learning under the CDM remains restricted as no direct links between the local

and international level exist.

Still, local political conditions and authorities have a strong impact on the process of

implementation.

The national government can provide a strong CDM framework with incentives, capacity

building and awareness raising.

Projects on the ground show feasibility of RE technologies, but cannot be translated into

stronger national legislation.




already existing plans to promote RE through a national scheme represent a barrier for CDM

projects. In China for example, several wind power projects were refused because conventional

wind power projects face the same barriers and regulations and were possible without the CDM.

The more diversified and privatized energy sector in the Philippines might increase the

effectiveness of the CDM as potential barriers are lower, but it has a negative effect on the

overall CDM performance as additionality is harder to prove.

The same accounts for national policy promoting RE: Since the Renewable Energy Law in the

Philippines has been enforced in 2008 project developers struggle to register CDM projects.

Initiatives promoting RE in India and China exist, but still face a lack of policy enforcement.

Strong SD criteria have a negative effect on the CDM performance, because project developers

do not receive any additional revenue and can choose their project’s location globally. National

policy might strengthen the effectiveness of the CDM with strong SD criteria in theory, but has

only little effect on the global CDM regime due to prevailing regulations. The same can be

observed with regard to environmental performance: Based on the Environmental Performance

Index provided in Annex 9 the conclusion can be drawn that strong environmental commitments

do not increase the overall CDM performance in the Philippines compared to India and China.

A strong national CDM infrastructure provides the framework for project developers, is vital

for RE awareness and the knowledge about CDM potentials in the host country: The Philippines

have developed a national CDM infrastructure, but in a highly bureaucratic system only a few

people actually support CDM activities. The DNA is integrated into the environmental ministry

like in India with restricted competencies in the energy sector. In India however, CDM

Promotional Centres on the State level support developers. The same accounts for China, but

where the DNA is part of a powerful planning commission. The DNA can furthermore define SD

criteria and evaluate CDM projects. However, the effect remains restricted as too high criteria

would discourage project developers who do not benefit from additional SD benefits.

Sub-national political conditions still receive only little attention. This work highlighted their

importance and showed the impact of local political authorities, corruption and awareness on

effective implementation of RE projects. Political authorities in the Philippines and even in a

centralized state like China have the power to promote or prevent projects. Local authorities

need to be convinced. In this process local SD benefits are important as they can persuade the

authorities in the project area. Experiences from the Philippines have also shown that

corruption and missing transparency on the local level can also be a threat to CDM projects. An

overall awareness for RE potential is the basis for successful CDM project implementation.

The interplay between national and local political authorities bears various potentials to

enhance CDM capacity from the national to the local level and learn from experience on the

ground for similar projects nationwide. These complex interactions could not be fully examined

here and remain a field for further research. Yet, this paper has shown, that the more

bureaucratic actors are involved in the process of CDM implementation, the more barriers exist.

Local authorities all three countries can obstruct CDM projects, but they can also promote pilot

projects despite negative national political conditions.



All variables have an impact on a successful implementation of CDM projects. Compared to India

and China domestic politics are especially relevant in a developing country like the Philippines. Yet,

they shape the effectiveness of the CDM only to a small degree. Further commitments remain very

little and cannot be translated into fundamental national legislation. Strong factors like a country’s

RE legislation or overall environmental performance that should actually support climate-friendly

actions seem to be irrelevant or even in contradiction to strong CDM performance.

Empirical findings also reveals several sharp contrasts between regime theory and practice:

Although the CDM involves affected groups and private actors as well as nonbinding aspects in

tandem with binding measures, the CDM does not penetrate the state politically to a high degree,

boost reforms or include the local level as a testing ground contrary to theoretical considerations

about holistic regime effectiveness. Although the CDM leads to relative improvements, the

mechanism provides no or even opposing incentives for the collective optimum of climate

protection and national policy development. Putting all information together leads to figure 6.3

that shows the various interactions between domestic politics and the global CDM regime.

Domestic politics matter – but they are less relevant for the effectiveness of the CDM than

expected. CDM authorities and a supportive political framework on the national level are important

to provide the basis for CDM project developers. Local political conditions have to be considered

and experiences from the ground could increase the effectiveness of the CDM. However, this is only

hard to achieve as long as the CDM itself remains a barrier to further political commitments

promoting RE source in developing countries. Analysts like Weiss and Jacobson believe that

international regimes “are only as effective as the parties make them”569 and they conclude that

“[t]he key issue is whether or not international environmental accords contribute to modifying the behaviour of states and, through states, that of enterprises and individuals. [...] The action should reach local communities, encourage coordination among ministries and agencies within countries, build administrative capacity within countries, promote dissemination of information and measures to inform the public, foster technical expertise and competence [...] motivate the private sector to promote compliance, and counter corruption and payoffs that hinder compliance.”570

Although Weiss and Jacobson examined compliance with international accords, this is all true for

the CDM that needs to penetrate the state to the local level in order to increase effectiveness.

569 Weiss / Jacobson 1998: p. 1. 570 Weiss / Jacobson 1998: pp. 511 and 551.

> Figure 6.3: Dependent Variable and Explaining Factors


Domestic politics matter for a successful CDM implementation, but have only little impact on further impacts of the CDM to

sustainable development and the political environment.

The CDM is effective to overcome financial barriers for RE projects, but has only little

effect in terms of sustainable development and political change.

host country’s RE potential national CDM infrastructure interplay national and local local capacity and awareness

national energy sector environmental performance

supportive national RE policy number of authorities involved corruption / ambiguity

CDM Host Country

green = positive effects on the effectiveness of the CDM regime grey = neutral with regard to the effectiveness of the CDM red = negative or even adverse effects

CDM Regime

- overcome barriers for renewables

- promote sustainable development

- lead to political change



6.3 Final Remarks, Limitations and Further Research

Finally, what lessons can and should be learnt from this research? This chapter will summarize

critical limits, before several ideas for further research as well as a brief outlook will be given.

The research for this thesis as well as the creation of a concrete methodological

framework for this paper with measurable indicators reveals a variety of limitations.

Only a small number of RE projects under the CDM were taken into account for this research: 25

projects in the Philippines and 50 each in India and China. Results from this should be handled with

caution as this relatively small sample cannot represent the statistical average and does not reflect

the various experiences from more than 2.000 already registered CDM projects all over the world.

Findings from the Philippines, India and China are hard to generalize and can only give an idea of all

the variables involved in the complex process of implementation:

“In a field as complex – and as dependent on local and issue realities – as implementation, any generalizations may be considered dubious; implying generalizations of a ‘global’ proportion all the more so.”571

However, the research above did not represent a quantitative study. It was moreover the purpose of

this work to analyse the effectiveness of the CDM in a more qualitative way and examine the

interactions between the global CDM regime and domestic politics in three specific host countries.

This leads us already to our second problem: how to measure effectiveness? This was and still

remains a major analytical challenge. Of course, we can measure how many tons of CO2 emissions

were reduced with the help of RE projects, we can investigate how many jobs were created through

the project activity and we can find indicators to measure environmental impacts. But what should

such indicators be compared to? This was not the aim of this work. This paper tried to illustrate the

potentials of the CDM that go far beyond project implementation, keeping the question in mind

what would have happened without the mechanism? Giving careful answers to that question will

always be biased, depending on the sources of documents, sample of projects, interview partners,

and not to forget the actual variables that are chosen for comparison. This fundamental problem is

also discussed in theoretical literature about implementation and compliance.572

The criterion of sustainable development is a good example for the complexity of this problem: How

can you measure effectiveness based on a term like SD, when nations cannot agree on a collective

definition for this multifaceted term and scientists discuss it in a very broad way? Again, every

single ton of CO2 that is reduced and every job that has been created with the help of a CDM

project activity promote sustainability in one or the other way. Yet, the total score is hard to

define. Last, but not least, the evaluation and discussion of the overall impact of the CDM is a

question of data availability and the sources of information. This paper has taken the barrier

analysis and the SD benefits from the project developers as a primary source. However, the

information given in the PDD might be predisposed and not reflect the actual situation of the

project after being implemented. This work has taken the outlook in the PDDs for granted, but

571 Najam, A. 1995: p. 25. 572 Weiss / Jacobson 1998 investigate eight countries and the EU and their compliance with five international environmental accords in a broad study with a huge variety of factors involving the nation-state including structures, procedures and actors on different levels. They admit that too many variables exist, most of which can only be measured inexactly.



further research and experiences from the four detailed case studies in the Philippines revealed

certain differences between the projects as they were planned and how they were finally

implemented. This research also concentrated on political variables and the potential of the CDM to

overcome political and economical barriers. However, social and technical barriers have to be

considered as additional important variables.

Further comparative research is needed to discuss and enhance the effectiveness of the

CDM, especially with regard to incentives to national and sub-national political change

The conclusions above and limitations mentioned give a variety of ideas for further research. First

of all, this thesis is limited due to the number of projects, countries and indicators involved.

Findings from this work should be compared to other project categories and countries to draw a

broader picture of the effectiveness of the CDM regime. A comprehensive research should also

include projects that have been rejected, failed to get registered or have been withdrawn.573 This

research has also shown the importance of local political framework conditions for an effective

implementation of the CDM. Corruption, the degree of awareness for CDM projects and other soft

factors seem to be as relevant as hard political issues like the institutional framework or the setting

of the energy sector. Further comparative research on the sub-national level could lead to a

broader understanding of the importance of soft political factors for the implementation of CDM

projects and finally lead to possible ways to overcome the political barriers mentioned above.

Outlook: A global regime needs to learn from local feedback and vice versa.

The CDM faces various criticisms from developing countries, private actors, NGOs and scientists. The

regime has already been developed and experiences from the ground led to new methodologies and

a shift from the project-by-project approach to the introduction of bundled CDM projects, so called

programmatic CDM.574 However, learning processes on the international level are slow as various

interests compete with each other. A careful advice from this paper would be to pay more attention

to the local level and its impact on an effective implementation of CDM projects. The political

conditions on the ground are highly relevant and can represent a fundamental barrier for CDM

projects. Consequently, programs to raise awareness for CDM potentials and for capacity building

are needed to broaden the perspective of the CDM and increase the potentials for activities under

this global regime. Another critical point that needs to be mentioned again is the criterion of

additionality. A CDM that prevents countries from stronger climate-friendly legislation is more than

contra-productive to the overarching collective goals of the international climate regime.

Eventually, the CDM bears a vast potential for bottom-up learning processes with projects

demonstration feasibility of various kinds of renewable energy technologies. The global regime as

well as the scientific debate should now focus on ways and mechanisms to facilitate spill-over

effects and promote a broader development of renewable energy sources in developing countries.

This could finally lead to bottom-up learning, increase the effectiveness of the CDM regime and

support climate-friendly political action on the ground following a very simple saying in the field of

environmental politics: Think global, act local!

573 Castro / Michaelowa 2008 included registered CDM projects, those in the pipeline, rejected and withdrawn in their empirical research to identify key parameters that influence CDM project success. 574 Figueres, C. 2008.



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Interviews, Events and Project Case Studies

Interviews with Experts and CDM Practitioners

25.6.2009, Manila, PHILIPPINES Camba, Jo-Rex E. - CDM Project Manager ([email protected]) Philippine Bio-Sciences Company Inc.

16.6.2009, Quezon City, PHILIPPINES Cruz, Danilo L. - Technical Manager ([email protected]) Pangea Green Energy

23.6.2009, Makati, PHILIPPINES Kadda, Ina - Project Manager ([email protected]) Bronzeoak Philippines, Asia Pacific Clean Energy

6.12.2008, Poznan, POLAND Koakutsu, Kazuhisa - Market Mechanism Sub Manager ([email protected]) Institute for Global Environmental Strategies (IGES) Japan

17.6.2009, Manila, PHILIPPINES Maceba, Catherine Paredes - Member National Board ([email protected]) Renewable Energy Coalition / Habitat for Humanity Philippines

6.12.2008, Poznan, POLAND / 23.6.2009, Manila, PHILIPPINES Recabar, Sandee G. - CDM Services Project Assistant ([email protected]) klima Climate Change Center at the Manila Observatory

5.12.2008, Poznan, POLAND Schneider, Lambert - Research Assistant Energy and Climate ([email protected]) Institute for Applied Ecology, Germany

19.6.2009, Clark, PHILIPPINES Scholz, Uwe Dr., Program Advisor ([email protected]) German Technical Cooperation (GTZ)

21.6.2009, Bangui, PHILIPPINES Tiatco, Segundino A., Plant Manager ([email protected]) Northwind Power Development Corporation

Events Attended for Research

01.12. - 14.12. 2008 Conference of the Parties (COP) 14 in Poznan, Poland Organized by: United Nations Framework Convention on Climate Change

15.06. - 19.06. 2009 Climate Clean Energy Week (4th Asia Clean Energy Forum) in Manila, Philippines Organized by: Asian Development Bank / USAid

18.06. - 19.06. 2009 Adaptation to Climate Change and Conservation of Biodiversity in the Philippines (workshop) in Clark, Philippines Organized by: Department of the Environment and Natural Resources of the Philippines

mailto:[email protected]











CDM Project Case Studies

1. 16.6.2009: Quezon City Controlled Disposal Facility Biogas Emission Reduction (Payatas)

2. 21.6.2009: NorthWind Bangui Bay Project (NorthWind Power Development Corporation)

3. 15.7.2009: Makati South Sewage Treatment Plant Upgrade (Philippines BioSciences)

4. 27.7.2009: San Carlos Renewable Energy Project (Bronceoak Inc.)

Guiding Questions for CDM Project Participants in the Philippines

1. How does your project promote sustainable development in the project area?

2. Is there any kind of technology and / or knowledge being transferred to the Philippines?

3. How do you interact with the local community and local political authorities?

4. What are the main barriers for implementing CDM projects in the Philippines?

5. How can local authorities and / or the national government support the implementation and maintenance of CDM projects?

6. Does the CDM in general support sustainable development? What has to be changed for a stronger promotion of sustainable development with the CDM in developing countries?

7. Will your project be enhanced or implemented similarly somewhere else in the Philippines?

8. Will the new Renewable Energy Law, passed in December 2008, affect your project activity or will even have a broader impact of the promotion of renewable energy in the Philippines?

(To get a broader understanding of the project and its impact on sustainable development,

further questions on the project site, the implementation process, problems with the

project and on other issues have been raised in additional individual questions.)

Guiding Questions for Other Actors Involved (Greenpeace / GTZ / DNA)

1. Do CDM projects in general promote sustainable development in the project area?

2. What are the main barriers for implementing CDM projects in the Philippines?

3. What role do local authorities and political institutions play (positive and negative)?

4. Do local communities benefit from CDM projects in a sustainable way?

5. Is there any kind of clean energy technology being transferred to local communities or firms?

6. Have political structures changed over the time due to the CDM?



Appendix

Annex 1 - “Think Global(ly), Act Local(ly)!” - Meaning and Origin

“Think global, act local!” seems to be a common phrase in the field of environmental politics. Yet,

its origin remains unclear. Where does the phrase come from? Its first use in an environmental

context is disputed and there seems to be no uniquely identifiable source for this statement. The

fundamental meaning however derives from a more and more complex and globalized world where

international environmental problems and other concerns call for local activity coupled with

overarching international strategies. Christian J. Stoeckert stresses the meaning of local groups and

individuals “to change the world, starting with actions within one’s own local community.”575

The Center for Air Pollution Impact and Trend Analysis refers to Rene Dubos, an advisor to the

United Nations Conference on the Human Environment in 1972:

“Think Globally, Act Locally refers to the argument that global environmental problems can turn into action only by considering ecological, economic, and cultural differences of our local surroundings. This phrase was originated by Rene Dubos as an advisor to the United Nations Conference on the Human Environment in 1972. In 1979, Dubos suggested that ecological consciousness should begin at home. He believed that there needed to be a creation of a World Order in which ‘natural and social units maintain or recapture their identity, yet interplay with each other through a rich system of communications’. In the 1980's, Dubos held to his thoughts on acting locally, and felt that issues involving the environment must be dealt with in their ‘unique physical, climatic, and cultural contexts.’”576

Robert I. Wakefield examines the term from an economical perspective, but he also describes how

environmentalists first bridged the gap between global thinking and local action in the 1970s:

“As early as the 1970s, international sojourners began attempts to bridge the extremes of global and local thinking. Interestingly, the first to suggest that the poles needed negotiation were not business leaders but forerunners of environmentalism. This included scholars as well as heads of environmental organisations. The focus of these early thinkers was not to suggest some overall global strategy, as business leaders might have done. Instead, they advocated the need for environmental groups to expand their narrow views on local issues and integrate that thinking into a more global perspective so as to generate more success in their activities. The first effort toward bridging the global and local was the now common phrase, think global, act local.”577

According to Wakefield, the origin of the term think globally, act locally. is subject to debate:

“Friends of the Earth, the non-governmental organisation dedicated to conserving nature, claimed that the entity’s founder, David Brower, created the phrase as its first motto in 1969 [...]. Another source argued that the originator was Canadian futurist and environmental economist Hazel Henderson [...]. Most observers, however, attribute the phrase to René Dubos, the French-American microbiologist and Pulitzer Prize-winning author, while he was advisor to the United Nations Conference on the Human Environment in 1972 [...].”578

Finally, the inherent logic of “think global, act local” was adopted by international business in the

process of globalization according to Wakefield when more and more firms competed on the global

market, but still needed to make profits on the local level.

575 Stoeckert, C. J. 2003: “Common objects: Think global, act local.” OMICS: A Journal of Integrative Biology, 7(1), 103-104. Citation from Wakefield, R. 2007: p. 3. 576 Center for Air Pollution Impact and Trend Analysis (CAPITA) with citations from Eblen, R. A. and Eblen W. 1994: The Encyclopedia of the Environment Houghton Mifflin Company, Boston. Source: http://capita.wustl.edu/ME567_Informatics/concepts/global.html [retrieved: 12.2.2010] 577 Wakefield, R. 2007: p. 2-3. 578 Wakefield, R. 2007: p. 3.

http://capita.wustl.edu/ME567_Informatics/concepts/global.html



Annex 2 - Developing Countries and Climate Technology Transfer

The development of the global climate change issue has developed long before the UNFCCC,

starting with environmental activity in the late 1980s.579 At the World Summit on Sustainable

Development in Johannesburg, the international community agreed to

“[...] support existing mechanisms and, where appropriate, establish new mechanisms for the development, transfer and diffusion of environmentally sound technologies to developing countries and economies in transition.”580

Technology transfer played a major role to integrate developing countries into climate

negotiations.581 As it was described in the introductory chapter, the different positions derive

mainly from a “North-South” divide, a differentiation between developing and developed countries.

This term should however not deny that still every developing country also acts individually in

international relations, but it reflects the existence of unifying interests and the need for

coordinated action among developing countries:

“The ‘North-South’ divide, ostensibly signifying the differences between the more industrialized economies of the global ‘North’ and the relatively less developed and developing countries of the global ‘South’, has been, and continues to be, a defining feature of global environmental politics.”582

The key international agreements on climate change are the original United Nations Framework

Conventions on Climate Change (signed in 1992 and entered into force in 1994) and the Kyoto

Protocol (signed in 1997 and entered into force 2005). “Neither places binding greenhouse gas

emission reduction targets on developing nations.”583 However, the UNFCCC calls on developed

countries to assist developing nations through technology transfer. Article 4.5 states that

“developed country Parties […] shall take all practicable steps to promote, facilitate and finance, as

appropriate, the transfer of, or access to, environmentally sound technologies and know-how to

other Parties, particularly developing country Parties, to enable them to implement the provisions

of the Convention. In this process, the developed country Parties shall support the development and

enhancement of endogenous capacities and technologies of developing country Parties. […].”584 In

order to assist in the implementation of this provision, an Expert Group on Technology Transfer

(EGTT) has been established by the UNFCCC conferences. This group reports and makes

recommendations to the Subsidiary Body for Scientific and Technical Advice (SBSTA), a body created

under the UNFCCC to deal with a variety of technological and scientific issues.

Programmes implementing technology transfer already exist. One of the most important is the

Global Environment Facility (GEF), a partnership of the World Bank and the United Nations.585 The

GEF is designed “to subsidise developing nations’ actions to respond to environmental concerns in

those situations in which the developing nations making the expenditure will obtain little benefit for

579 See Daniel Bodansky for a summary on the history of the global climate change regime in: Luterbacher / Sprinz 2001: pp. 23-40. 580 United Nations 1992: p. 50. 581 For a review of literature on the transfer of Energy Efficient Technologies see Worrell, E. et al. 2001. 582 Najam, Adil 2005: p. 111. 583 Barton, J. 2007: p. 2. 584 UNFCCC 1996, Article 4.5. 585 See Global Environmental Facility (GEF) 2008. See also www.gefweb.org/ [retrieved: 12.2.2010].

http://www.gefweb.org/



themselves even though the action will, on net, benefit the rest of the world.” The GEF has also

been involved in the renewable energy sector and supported in particular wind and photovoltaic

projects. Further international and bilateral projects are the World Bank Renewable Energy

Division, the Climate Technology Implementation Plan (CTIP), which was created in 1995 by a group

of OECD countries and the EU and the Climate Technology Partnership (CTP), a US technology

program.) In its early study “Methodological and Technological Issues in Technological Transfer”,

the UNFCCC investigated patents and restrictive business practices concerning the CDM. The report

emphasised the benefits of IPR and stated “that the costs of licensing are small.”586 It suggested

production-sharing contracts “under which technology suppliers would license technology in return

for a share of the production.”587 A later paper, drafted by the Tata Energy Research Institute in

India, presented a somewhat different perspective, based on the Commission on Intellectual

Property Rights in the United Kingdom.588

When we talk about renewable energy, we also talk about technology transfer as a key element

eloping countries not only in the context of climate negotiations.589 Technology transfer has been

one of the most important topics for developing countries during the entire negotiating process

since 1991.590 Industrialised countries are responsible, both historically and in present, for the

majority of GHG emissions. Developing countries, however, are also increasingly contributing to

climate change due to their rapid economic growth.591 “Access to existing technologies and

technological innovations is commonly seen as a prerequisite for the reduction of emissions in

developing countries.”592

There are several modes and meanings of renewable energy technology transfer.593 One is to

provide products incorporating the technology (e.g. photovoltaic panels for off-grid electrical

supply), another one is to license the capability to produce such products (e.g. to an indigenous

company or a joint venture) and a last one is to support the developing countries’ capability to

research and to produce such products independently of any licenser. “The rapid development and

deployment of low-carbon technologies is vital to climate change mitigation.”594 In its Special

Report on Methodological and Technological Issues in Technology Transfer, the IPCC defines

technology transfer “as a broad set of processes covering the flows of know-how, experience and

equipment for mitigating and adapting to climate change amongst different stakeholders such as

governments, private sector entities, financial institutions, non-governmental organizations (NGOs)

and research/education institutions.”595 All kinds of hard- and software as well as all relevant

information and knowledge is covered by this broad definition and it refers to technology transfer

“between and within countries, from developed to developing countries and vice versa whether on

586 Barton, J. 2007: p. 5. 587 Barton, J. 2007: p. 5. 588 Tata Energy Research Institute (TERI) 2003 589 See Hoekmann / Javorcik 2006: p. 1. 590 See Gómez-Echeverri, L. 2000. 591 International Energy Agency (IEA) 2008. 592 Schneider/Holzer/Hoffmann 2008: p. 2920. 593 See also United Nations Development Program (UNDP) 2007(b). 594 United Nations Development Program (UNDP) 2007(b): p. 12. 595 Intergovernmental Panel on Climate Change (IPCC) 2000: p. 3.



purely commercial terms or on a preferential basis.”596 This broad definition will be the basis for

the following investigation of this paper.

In 1996 the IPCC was requested by the UNFCCC Subsidiary Body for Scientific and Technological

Advice (SBSTA) to prepare a Technical Paper on methodological and technological aspects of

technology transfer.597 The IPCC identifies three major dimensions under which the government has

the potential to make technology transfer more effective598: capacity building, involving human

capacity and a society’s infrastructure, enabling the environment with governmental action,

mechanisms for technology transfer by a partnership among public and private stakeholders.

Knowing these key incentives gives a framework for assessing the Philippines later on.

The IPCC also identified certain stages of technology transfer and barriers to the transfer of

environmentally sound technologies at each stage of the process.599 “These barriers range from lack

of information; insufficient human capabilities; political and economic barriers such as lack of

capital, high transaction costs, lack of full cost pricing, and trade and policy barriers; lack of

understanding of local needs; business limitations, such as risk aversion in financial institutions; and

institutional limitations such as insufficient legal protection, and inadequate environmental codes

and standards.” Schneider et al. 2008 identified three major barriers for international technology

transfer600: A lack of commercial viability, a lack of information on investment opportunity and

transaction costs and a lack of access to capital actors might exist. These barriers are all closely

linked to the institutional framework of a country.601 All this will be investigated in depth when it

comes to renewable energy technologies.

There is no patent or a pre-set answer to drivers and barriers to technology transfer. This paper will

therefore focus on possible barriers to renewable energy, the potential of the CDM to overcome

barriers and the situation and especially the political framework of both case studies. The

identification of barriers will be country and sector based.

596 Seres / Haites / Murphy 2007: p. 1. 597 UNFCCC Document 1996 [FCCC/SBSTA/1996/8]. The IPCC Plenary finally accepted the report during its 16th Session in Montreal, 1.-8.5.2000. 598 IPCC 2000, pp. 4ff. 599 Different stages can be: identification of needs, choice of technology, assessment of conditions of transfer, agreement and implementation, evaluation, adjustment to local conditions and replication (according to IPCC 2000, p. 3). 600 For the quotations see Schneider et al. 2008: p. 2921f. 601 IPCC 2000.

National Institutional Framework

Barriers - Commercial viability - Information - Access to Capital

Technology Provider

Technology Recipient

Intellectual Property

Right


> Figure 9.1: Barriers to Technology Transfer



Annex 3 (a) - UNFCCC: Excerpts from the Convention and Parties’ Map

> Figure 9.2: Parties to the United Nations Framework Convention on Climate Change (UNFCCC)


Article 4 [Commitments]

1. All Parties, taking into account their common but differentiated responsibilities and their specific national and regional development priorities, objectives and circumstances, shall:

(a) Develop, periodically update, publish and make available to the Conference of

the Parties, in accordance with Article 12, national inventories of anthropogenic emissions by sources and removals by sinks of all greenhouse gases not controlled by the Montreal Protocol, using comparable methodologies to be agreed upon by the Conference of the Parties;

(b) Formulate, implement, publish and regularly update national and, where appropriate, regional programmes containing measures to mitigate climate change by addressing anthropogenic emissions by sources and removals by sinks of all greenhouse gases not controlled by the Montreal Protocol, and measures to facilitate adequate adaptation to climate change;

(c) Promote and cooperate in the development, application and diffusion, including transfer, of technologies, practices and processes that control, reduce or prevent anthropogenic emissions of greenhouse gases not controlled by the Montreal Protocol in all relevant sectors, including the energy, transport, industry, agriculture, forestry and waste management sectors;

[...]

3. The developed country Parties and other developed Parties included in Annex II shall provide new and additional financial resources to meet the agreed full costs incurred by developing country Parties in complying with their obligations under Article 12, paragraph 1. They shall also provide such financial resources, including for the transfer of technology, needed by the developing country Parties to meet the agreed full incremental costs of implementing measures that are covered by paragraph 1 of this Article and that are agreed between a developing country Party and the international entity or entities referred to in Article 11, in accordance with that Article. The implementation of these commitments shall take into account the need for adequacy and predictability in the flow of funds and the importance of appropriate burden sharing among the developed country Parties.



4. The developed country Parties and other developed Parties included in Annex II shall also assist the developing country Parties that are particularly vulnerable to the adverse effects of climate change in meeting costs of adaptation to those adverse effects.

5. The developed country Parties and other developed Parties included in Annex II shall take

all practicable steps to promote, facilitate and finance, as appropriate, the transfer of, oraccess to, environmentally sound technologies and know-how to other Parties, particularly developing country Parties, to enable them to implement the provisions of the Convention. In this process, the developed country Parties shall support the development and enhancement of endogenous capacities and technologies of developing country Parties. Other Parties and organizations in a position to do so may also assist in facilitating the transfer of such technologies.

6. In the implementation of their commitments under paragraph 2 above, a certain degree of

flexibility shall be allowed by the Conference of the Parties to the Parties included in Annex I undergoing the process of transition to a market economy, in order to enhance the ability of these Parties to address climate change, including with regard to the historical level of anthropogenic emissions of greenhouse gases not controlled by the Montreal Protocol chosen as a reference.

7. The extent to which developing country Parties will effectively implement their

commitments under the Convention will depend on the effective implementation by developed country Parties of their commitments under the Convention related to financial resources and transfer of technology and will take fully into account that economic and social development and poverty eradication are the first and overriding priorities of the developing country Parties.

[...]

Article 11 [Financial Mechanism]

1. A mechanism for the provision of financial resources on a grant or concessional basis, including for the transfer of technology, is hereby defined. It shall function under the guidance of and be accountable to the Conference of the Parties, which shall decide on its policies, programme priorities and eligibility criteria related to this Convention. Its operation shall be entrusted to one or more existing international entities.

2. The financial mechanism shall have an equitable and balanced representation of all Parties

within a transparent system of governance.

3. The Conference of the Parties and the entity or entities entrusted with the operation of the financial mechanism shall agree upon arrangements to give effect to the above paragraphs, which shall include the following:

(a) Modalities to ensure that the funded projects to address climate change are in

conformity with the policies, programme priorities and eligibility criteria established by the Conference of the Parties;

(b) Modalities by which a particular funding decision may be reconsidered in light of these policies, programme priorities and eligibility criteria;

(c) Provision by the entity or entities of regular reports to the Conference of the Parties on its funding operations, which is consistent with the requirement for accountability set out in paragraph 1 above; and

(d) Determination in a predictable and identifiable manner of the amount of funding necessary and available for the implementation of this Convention and the conditions under which that amount shall be periodically reviewed.

[...]



Annex 3 (b) - The Kyoto Protocol: Extracts and Parties’ Map

> Figure 9.3: Parties to the Kyoto Protocol


Article 2 [Promotion of Sustainable Development]

1. Each Party included in Annex I, in achieving its quantified emission limitation and reduction commitments under Article 3, in order to promote sustainable development, shall:

a. Implement and/or further elaborate policies and measures in accordance with its

national circumstances, [...] b. Cooperate with other such Parties to enhance the individual and combined effectiveness

of their policies and measures adopted under this Article, pursuant to Article 4, paragraph 2 (e) (i), of the Convention. To this end, these Parties shall take steps to share their experience and exchange information on such policies and measures, including developing ways of improving their comparability, transparency and effectiveness. The Conference of the Parties serving as the meeting of the Parties to this Protocol shall, at its first session or as soon as practicable thereafter, consider ways to facilitate such cooperation, taking into account all relevant information. [...]

Article 6 [Joint Implementation]

1. For the purpose of meeting its commitments under Article 3, any Party included in Annex I may transfer to, or acquire from, any other such Party emission reduction units resulting from projects aimed at reducing anthropogenic emissions by sources or enhancing anthropogenic removals by sinks of greenhouse gases in any sector of the economy [...].

Article 11 [Financial Resources]

2. In the context of the implementation of Article 4, paragraph 1, of the Convention, in accordance with the provisions of Article 4, paragraph 3, and Article 11 of the Convention, and through the entity or entities entrusted with the operation of the financial mechanism of the Convention, the developed country Parties and other developed Parties included in Annex II to the Convention shall:

(a) Provide new and additional financial resources to meet the agreed full costs incurred by developing country Parties in advancing the implementation of existing commitments under Article 4, paragraph 1 (a), of the Convention that are covered in Article 10, subparagraph (a) [...].



Article 12 [Clean Development Mechanism]

1. A clean development mechanism is hereby defined.

2. The purpose of the clean development mechanism shall be to assist Parties not included in Annex I in achieving sustainable development and in contributing to the ultimate objective of the Convention, and to assist Parties included in Annex I in achieving compliance with their quantified emission limitation and reduction commitments under Article 3.

3. Under the clean development mechanism: (a) Parties not included in Annex I will benefit from project activities resulting in

certified emission reductions; and (b) Parties included in Annex I may use the certified emission reductions accruing from

such project activities to contribute to compliance with part of their quantified emission limitation and reduction commitments under Article 3, as determined by the Conference of the Parties serving as the meeting of the Parties to this Protocol.

4. The clean development mechanism shall be subject to the authority and guidance of the Conference of the Parties serving as the meeting of the Parties to this Protocol and be supervised by an executive board of the clean development mechanism.

5. Emission reductions resulting from each project activity shall be certified by operational entities to be designated by the Conference of the Parties serving as the meeting of the Parties to this Protocol, on the basis of:

(a) Voluntary participation approved by each Party involved; (b) Real, measurable, and long-term benefits related to the mitigation of climate

change; and (c) Reductions in emissions that are additional to any that would occur in the absence

of the certified project activity.

6. The clean development mechanism shall assist in arranging funding of certified project activities as necessary.

7. The Conference of the Parties serving as the meeting of the Parties to this Protocol shall, at its first session, elaborate modalities and procedures with the objective of ensuring transparency, efficiency and accountability through independent auditing and verification of project activities.

8. The Conference of the Parties serving as the meeting of the Parties to this Protocol shall ensure that a share of the proceeds from certified project activities is used to cover administrative expenses as well as to assist developing country Parties that are particularly vulnerable to the adverse effects of climate change to meet the costs of adaptation.

9. Participation under the clean development mechanism, including in activities mentioned in paragraph 3 (a) above and in the acquisition of certified emission reductions, may involve private and/or public entities, and is to be subject to whatever guidance may be provided by the executive board of the clean development mechanism.

10. Certified emission reductions obtained during the period from the year 2000 up to the beginning of the first commitment period can be used to assist in achieving compliance in the first commitment period.

Article 17 [Emissions Trading]

The Conference of the Parties shall define the relevant principles, modalities, rules and guidelines, in particular for verification, reporting and accountability for emissions trading. The Parties included in Annex B may participate in emissions trading for the purposes of fulfilling their commitments under Article 3. Any such trading shall be supplemental to domestic actions for the purpose of meeting quantified emission limitation and reduction commitments under that Article.



Annex 3 (c) - UNFCCC Annex I/II and Kyoto Protocol Annex B countries

> Figure 9.4: UNFCCC Annex I/II and Kyoto Protocol Annex B Countries

a) Annex I and II to the UNFCCC

b) Annex B to the Kyoto Protocol

Annex I Annex II Australia Austria Belarus a Belgium Bulgaria a Canada Croatia a * Czech Republic a * Denmark European Economic Community Estonia a Finland France Germany Greece Hungarya Iceland Ireland Italy Japan Latvia a Liechtenstein* Lithuania a Luxembourg Monaco* Netherlands New Zealand Norway Poland a

Portugal Romania a Russian Federation a Slovakia a * Slovenia a * Spain Sweden Switzerland Turkey Ukraine a United Kingdom of Great Britain and Northern Ireland United States of America

Source: UNFCCC 1992, p.23.

Annex II Australia Austria Belgium Canada Denmark European Economic Community Finland France Germany Greece Iceland Ireland Italy Japan Luxembourg Netherlands New Zealand Norway Portugal Spain Sweden Switzerland United Kingdom of Great Britain and Northern Ireland United States of America (Turkey was deleted from Annex II by an amendment that entered into force 28 June 2002, pursuant to decision 26/CP.7 adopted at COP.7.)

Source: UNFCCC 1992, p.24.

Party (Quantified emission

limitation or reduction commitment in

percentage of base year or period)

Australia (108) Austria (92) Belgium (92) Bulgaria a (92) Canada (94) Croatia a (95) Czech Republic a (92) Denmark (92) Estonia a (92) European Community (92) Finland (92) France (92) Germany (92) Greece (92) Hungary a (94) Iceland (110) Ireland (92) Italy (92) Japan (94) Latvia a (92) Liechtenstein (92) Lithuania a (92) Luxembourg (92) Monaco (92) Netherlands (92) New Zealand (100) Norway (101) Poland a (94) Portugal (92) Romania a (92) Russian Federation* (100) Slovakia a (92) Slovenia a (92) Spain (92) Sweden (92) Switzerland (92) Ukraine a (100) United Kingdom (92) United States of America (93)

Source: UNDP 1997, p. 18.

a Countries that are undergoing the process of transition to a market economy. * Note: Countries added to Annex I by an amendment that entered into force

on August 13th 1998, pursuant to decision 4/CP.3 adopted at COP.3.

(Differences between Annex I UNFCCC and Annex B printed in bold)



Annex 4 - Rules and Procedures: How the Clean Development Works

Planning a CDM project activity

CDM project participants plan a project.

1

Creating a Project Design Document (PDD)

Information on technical and organizational aspects

National approval from each Party involved

Approval of voluntary participation from the DNA

3

Validation

On the basis of the PDD is carried out by the DOE

4

Registration

Acceptance of a validated project as a CDM project

5

Monitoring a CDM activity Verification and certification

Issuance of CERs

All necessary data on GHG emission reductions

6

Distribution of CERs

CERs are distributed among all project participants 7

2

CDM project (Large Scale /

Small Scale CDM)

Approved

methodology

Registration

New

methodology

PDD EB approves

methodology

Validation

> Figure 9.6: CDM Project Cycle and Approval Process

Source: Illustration by the author based on data from IGES 2008

GHG emissions at a specific site in a developing country

baseline scenario

proposed project

scenario

Investing Annex 1 party receives CER

(Kyoto Protocol Art. 12)

CER

Annex 1 country total emission cap

Acquired CERs are added and so the

emission cap increases.

Non-Annex 1 country should also benefit from project.

projected amount of

GHG emissions from the project

site

Assistance to the project implementation.

> Figure 9.5: Emissions Trading Systems and the Outline of the CDM

Source: Illustrations by the author based on IGES 2006.

baseline emissions

emissions allowance project emissions

emission

reduction

GHG emissions GHG emissions

year

year

without

CDM

with CDM

cap-and-trade system baseline-credit system



Annex 5 - Renewable Energy: Availability and Projects under the CDM

Source: BMU / Umweltbundesamt 2007: p. 7.

> Figure 9.7 Availability of Renewables and Current Energy Demand

> Figure 9.8: Classification of CDM Projects

Source: UNEP Risoe Cenre 2010 ( graphs from: http://cdmpipeline.org/cdm-projects-type.htm and http://cdmpipeline.org/cers.htm; RE diagram: Illustration by the author with data from UNEP Risoe Centre.

Centrehttp://www.cdmpipeline.org/cdm-projects-type.htm ………………..

renewable

energy

a) number of CDM projects (%) in each category

39,9%

22,8%

21,3%

9,7%

4,9%1,0% 0,0% 0,5%

Hydro Biomass Energy

Wind Biogas

Fossil fuel switch Solar

Geothermal Tidal

b) growth of expected CERs until 2012



Source: UNEP Risoe Centre CDM Project Pipeline:

http://www.cdmpipeline.org/cdm-projects-type.htm [retrieved: 28.1.2010]

> Figure 9.9: CDM Project Pipeline From January 1st 2010 – Overview

a) CDM Projects Grouped in Types

b) Percentage Share of the Four Largest Categories

Projects focused on in this research.



Source: BMU / Umweltbundesamt 2007: p. 4 (“Promoting Renewable Energy Technologies in Developing Countries through the Clean Development Mechanism”).

> Figure 9.10: Overcoming Barriers For RE Projects under the CDM



Annex 6 - Climate Change and Multilevel Governance: Key Actors, Functions and Tools

> Figure 9.11: Functions, Actors and Tools on Different Levels of Government

Source: Corfee-Morlot et al. 2009: pp. 48-49.



Annex 7 - CDM Project Design Document (PDD) Form, Version 03



This official form provided by the CDM Executive Board is designed form for CDM project developers. Source: http://cdm.unfccc.int/Reference/PDDs_Forms/PDDs/index.html [retrieved: 12.2.2010].



Annex 8 - Environmental Vulnerability Index 2004 and Environmental Performance Index 2008

> Figure 9.12: Environmental Vulnerability Index 2004

The Environmental Vulnerability Index (EVI) is a unitless index score ranging from 174 (for low vulnerability) to 450 (for high vulnerability). The EVI has been designed to reflect the extent to which the natural environment of a country is prone to damage and degradation. The EVI is based on 50 indicators for estimating the vulnerability of the environment of a country to future shocks.

Source: Kaly, U.L., Pratt, C.R. and Mitchell, J. (2004). The Demonstration Environmental Vulnerability Index (EVI) 2004. SOPAC Technical Report 384. (http://sedac.ciesin.columbia.edu/es/compendium.html)

Figure 9.13(a and b): Environmental Performance Index 2008 (Overall Performance and Climate Change)

> a) Overall Environmental Performance Index 2008

The Environmental Performance Index (EPI) is a unitless score based on a theoretical range from 0 to 100 (0 representing the farthest from target and 100 representing attainment of the target). The EPI score quantifies a country's performance towards (1) reducing environmental stresses on human health, and (2) promoting ecosystem vitality and sound natural resource management.

b) Climate Change Policy Category Scores 2008

The Climate Change Policy Category of the Ecosystem Vitality Objective from the 2008 EPI is a unitless score based on a theoretical range from 0 to 100 (0 represents the farthest from the target and 100 represents the attainment of the target). Scores are averaged across three constituent indicators: Emissions per capita, Emissions per electricity and Industrial carbon intensity. This category weight is 25% of the overall EPI.

Source: © 2008. The Trustees of Columbia University in the City of New York. Esty, Daniel C., M.A. Levy, C.H. Kim, A. de Sherbinin, T. Srebotnjak, and V. Mara. 2008 Environmental Performance Index. New Haven: Yale Center for Environmental Law & Policy. Data available:

http://sedac.ciesin.columbia.edu/es/epi/ / http://epi.yale.edu

http://sedac.ciesin.columbia.edu/es/compendium.html

http://sedac.ciesin.columbia.edu/es/epi/

http://epi.yale.edu/



Annex 9 - Environmental Performance Index 2010 Country Profiles (Philippines, India and China)

EPI benchmarks the ability of nations to protect the environment over the next decades by integrating 76 data sets – tracking natural resource endowments, past and present pollution levels, environmental management efforts, and the capacity of a society to improve its environmental performance – into 21 indicators of environmental sustainability.

> Figure 9.14 (a): Environmental Performance Index (Philippines)

Source: Esty / Levy et al. 2010.

> Figure 9.14 (b) Comparison - Environmental Sustainability Index 2005 (Philippines)

Source: Esty / Levy et al. 2005: p. 212.



> Figure 9.14 (c): Environmental Performance Index 2010 (India)


> Figure 9.14 (d): Comparison - Environmental Sustainability Index 2005 (India)




> Figure 9.14 (e): Environmental Performance Index 2010 (China)


> Figure 9.14 (f): Comparison - Environmental Sustainability Index 2005




Annex 10 - IEA Renewable Energy Database: Philippines, India, China

> Figure 9.15 (a): RE Policies and Measures in the Philippines (table)

Name of Policy Type Target Sector Year

Renewable Energy Act •Financial •Regulatory Instruments

•Multiple Renewable Energy Sources

•Electricity 2008

Biofuels Act •Financial •Incentives/Subsidies •Regulatory Instruments

•Bioenergy •Transport 2007

Investment Priorities Plan (IPP) •Financial •Incentives/Subsidies •Regulatory Instruments

•Multiple Renewable Energy Sources •Ocean •Solar •Wind

•Electricity 2002

Renewable Energy & Energy Efficiency Partnership (REEEP)

•Education and Outreach •Incentives/Subsidies •Policy Processes •Voluntary Agreement


•Multi-sectoral Policy

2002

An Act Ordaining Reforms In The Electric Power Industry, Amending For The Purpose Certain Laws And For Other Purposes

•Regulatory Instruments •Multiple Renewable Energy Sources

•Electricity 2001

Executive Order 462: New and renewable energy programme

•Incentives/Subsidies •Regulatory Instruments

•Ocean •Solar •Wind

•Electricity 1997 (mod. 2000)

An Act Creating the Department of Energy's Rationale for the Organization and Functions of Government Agencies Related to Energy and Other Related Purposes

•Policy Processes •Multiple Renewable Energy Sources


1992

Mini-Hydro Law •Financial •Hydropower •Electricity 1991

An Act to Promote the Exploration and Development of Geothermal Resources

•Financial •Regulatory Instruments

•Geothermal 1978

> Figure 9.15 (b): RE Policies and Measures in India (table)


Government Assistance for Small Hydropower Stations

•Incentives/Subsidies •Financial

•Hydropower •Electricity

Government Assistance for Wind Power Development

•Incentives/Subsidies •Financial

•Wind •Electricity

Generation based incentives for wind power

•Incentives/Subsidies •Wind •Electricity 2008

National Action Plan on Climate Change

•Policy Processes •Solar Photovoltaic •Solar Thermal

•Framework Policy

2008

Solar Power Generation Based Incentive

•Incentives/Subsidies •Solar Photovoltaic •Solar Thermal

•Electricity 2008

Ethanol Production •Incentives/Subsidies •Policy Processes •Regulatory Instruments


India-Brazil-South Africa Declaration on Clean Energy

•Voluntary Agreement •Multiple Renewable Energy Sources


2007

Integrated Energy Policy •Policy Processes •Multiple Renewable Energy Sources

•Electricity 2006



Tariff Policy 2006 •Incentives/Subsidies •Regulatory Instruments


•Electricity 2006

National Electricity Policy •Policy Processes •Multiple Renewable Energy Sources

2005

Central Financial Assistance (CFA) for Biogas Plants

•Education and Outreach •Financial •Policy Processes •Regulatory Instruments •Incentives/Subsidies

•Bioenergy •Electricity 2004

Electricity Act 2003 •Regulatory Instruments •Multiple Renewable Energy Sources

•Electricity 2003

Energy Conservation Act •Education and Outreach •Regulatory Instruments


•Framework Policy

2001

> Figure 9.15 (c): RE Policies and Measures in China (table)


Guangxi Province 1 Million Mu Bio-Fuel Forest Project

•Public Investment •Bioenergy •Transport 2008

Shandong Province One Million Rooftops Sunshine Plan

•Policy Processes •Regulatory Instruments

•Geothermal •Solar Photovoltaic •Solar Thermal


2008

Shandong Province Village Renewable Energy Regulations

•Incentives/Subsidies •Regulatory Instruments



2008

Hainan Province Plan for the Construction of Wind Farms

•Public Investment •Wind •Electricity 2007

Medium and Long Term Development Plan for Renewable Energy

•Policy Processes •Multiple Renewable Energy Sources

•Framework Policy

2007

National Climate Change Program •Policy Processes •Multiple Renewable Energy Sources

•Framework Policy

2007

Preferential Tax Policies for Renewable Energy

•Financial •Multiple Renewable Energy Sources

•Framework Policy

2007

Shandong Province energy fund •Public Investment •RD & D

•Solar Thermal

•Heating and Cooling (Domestic / Industrial Process)

2007

US China MOU on Biomass Development

•RD & D •Voluntary Agreement

•Bioenergy •Multi-sectoral Policy

2007

Eleventh Five-year Plan •Policy Processes •Framework Policy

2006

Renewable Energy Development Targets

•Policy Processes •Framework Policy

2006

Renewable Energy Law •Policy Processes •Multiple Renewable Energy Sources

•Framework Policy

2006

Support for Biogas Projects •Policy Processes •Bioenergy •Electricity 2006

Wind Power Concession Programme •Incentives/Subsidies •Wind •Electricity 2003

Reduced VAT and Income Tax •Financial •Wind •Electricity 2002

Support for fuel ethanol production •Financial •Incentives/Subsidies


Brightness Programme •Policy Processes •Hydropower •Solar Photovoltaic •Wind

•Electricity 1996

Source: IEA Renewable Energy Database (http://iea.org/textbase/pm/?mode=re) [retrieved: 12.2.2010]



Annex 11 - Energy Supply and CDM Approval in the Philippines

Submission of the Application Document

A project design document by the project participant and the description of sustainable development benefits have to be submitted.

1

Referral to Technical Evaluation Committee

An appropriate and relevant TEC reviews the project application. The TEC will assess the documents and submit its evaluation report to the CDM Steering Committee.

National approval from each Party involved

The CDM Steering Report will assess the TEC report. It can reject the recommendations or submit its endorsements to the secretary of the DENR.

3

4 Registration

The DENR reviews the endorsement report and finally decides weather to approve or to reject the project application.

2

> Figure 9.17: CDM Project Approval Process in the Philippines

Source: Illustration by the author based on IGES 2006: p. 70f.

*Total primary energy supply (TPES) is made up of ‘indigenous production + imports - exports - international marine bunkers ± stock changes’. TPES is a measure of commercial energy consumption. In some instances, the

sum of the shares by energy source may not sum up to 100% because pumped storage generation has not been deducted from hydroelectricity generation.

** Natural Gas is considered to be a renewable energy source in the Philippines.

Source: Illustration by the author based on data from UNDP 2007 (b).

> Figure 9.16: Total Primary Energy Supply (TPES) in the Philippines

5

45,9

0

20

29,2

0

13,6

35,4

5,9

20,7

24,4

0

0

5

10

15

20

25

30

35

40

45

50

Coal

Oil

(Natu

ral

Gas)

**

Hydro

,

Sola

r, W

ind,

Geoth

erm

al

Bio

mass

,

Wast

e

Nucle

ar

1990 2004TPES* in %

Fossil Fuels Renewable Energy Other



Annex 12 - CDM Eligibility and Approval Criteria for the Philippines by the Philippines’ Department of Environment and Natural Resources Source: http://cdmdna.emb.gov.ph/cdm/public/cdm-ph-hostapproval.php?main=cdmph&sub=hostapproval [Retrieved: 12.2.2010]

The National Approval from the host country is a critical aspect of and a major step in the CDM

project cycle, which requires that proposed CDM projects must first be reviewed by the host

country DNA as a prerequisite to the international registration of a proposed project activity as a

CDM under the UNFCCC and the Kyoto Protocol, In the case of the Philippines, the DENR and its

support mechanisms as the DNA for CDM, evaluates, in accordance with the Philippines’ national

approval criteria, whether a project activity contributes to the country’s sustainable development

and whether the Philippine-based project participants have the legal capacity to participate in the

proposed project. The DENR Administrative Order No. 2005-17 prescribes the national approval

criteria of the DENR as the Philippine DNA for CDM:

The project participants must possess the legal capacity to participate in the proposed CDM

project activity;

The proposed project activity must contribute to the Philippines’ sustainable development

in 3 aspects:

o Economic dimension

Provide variety economic opportunities;

Provide proper safety nets and compensatory measures for affected

stakeholders;

Promote the cleaner, more efficient, energy saving, technically sounded

and environmental-friendly technology in the sector (e.g. renewable

energy, waste management, reforestation, etc.); and

Provide new financial resources.

o Environmental dimension

Comply with the environmental policies and standards set by the

Philippines;

Improve the quality of the environment, e.g. air, water, soil, etc.;

Promote sustainable use of natural resources.

o Social dimension

Build up the capacities of local stakeholders through education and training;

Provide local resources and services to vulnerable groups; and

Encourage local participation in the CDM project activity.

Project level indicators shall be proposed by the project participants to be used in identifying the

sustainable development impacts of a project activity. The overall sustainable development impact

of a proposed project activity must be positive.

http://cdmdna.emb.gov.ph/cdm/public/cdm-ph-hostapproval.php?main=cdmph&sub=hostapproval



Annex 13 - CDM Projects in the Philippines: Barrier Analysis and Sustainable Development (sample)

> Figure 9.18: Barrier Analysis and Sustainable Development (Sample Philippines)

geotherm.

(1) wind (1)

hydro (1)

biomass (3)

biogas (19)

solar (0)

all (25)

1) Barriers Identified by the Project Participants in the Barrier Analysis

investment barriers (lack of financial incentives without the CDM)

Visayas no a primary

investment area (1)

high initial investments / risky funding / no subsidies for wind (1)

--

high investment risk / RE

projects not attractive (3)

additional costs / lack of

financial incentives (18)

-- 23

technical barriers (and/or uncommon practice to use this technology)

--

only wind power project

/ lack of experience (1)

--

critical supply of biomass / no reference

plants (3)

uncertain performance and biogas

availability / technology

unknown (18)

-- 22

political barriers (and barriers due to prevailing practice)

privatization / government supports the national gas market (1)

--

absence of mandatory laws and

regulations (1)

no national standards and regulations /

bias against RE sources (17)

-- 19

social barriers (lack of awareness and local support)

-- lack of skilled labour in the

Philippines (1) -- --

training for new staff /

cultural barriers (16)

-- 17

other barriers -- damages due to typhoons

(1) -- -- --- -- 1

no barrier analysis (according to PDD)

Investment analysis alone proves financial barriers, but no detailed barrier analysis. (Additionality Step 3 missing in CDM projects’ PDDs) 2602

-- -- (1) -- (1) --

2) Contribution to Sustainable Development According to the PDD

Impacts on the Environment

mitigate greenhouse gas emissions

1 1 1 3 19 -- 50

use clean energy and protect environment (additional to GHG reduction)

1 1 1 3 18 -- 34

Socio-economic Impacts

improve livelihoods of people esp. in rural areas (quality of live / energy security)

1 1 1 2 19 -- 31

create local employment and improve economy

-- 1 1 3 3 -- 39

empower human and institutional capacity / education / training

-- 1 -- -- 2 -- 2

Further Political and Technological Impacts

stimulate growth of RE in the Philippines

-- 1 -- 15 -- 14

pilot project, for demonstration

-- 1 -- 2

18 -- 7

technology transfer -- 1 -- 1 2 -- 4

602 This number needs to be added to “investment barriers”. The “Tool for the demonstration and assessment of additionality” states that project participants may choose to apply Step 2 (Investment analysis) OR Step 3 (Barrier analysis) to demonstrate additionality. Most projects do both.



Out of 26 energy industries related projects in the Philippines (December 2009), 25 dealt with renewable energy sources. CDM Host country: Republic of the Philippines

solar energy (0 projects)

wind power (1 project)

hydropower (1 project)

biomass(3 projects)

biogas (19 projects)

geothermal (1 project)

(25 projects)

Projects have been visited by the author in 2009.

Registered Title Annex 1 Parties Methodology * Reductions **

10 Sep 06 NorthWind Bangui Bay Project

Canada, Netherlands Finland, France, Sweden, Germany, Great Britain, Japan, Norway

ACM0002 ver. 6 56788


06 Jun 08 Hedcor Sibulan 42.5 MW Hydroelectric Power Project ACM0002 ver. 6 95174


13 Apr 07 San Carlos Renewable Energy Project Great Britain AMS-I.D. ver. 9 37658

10 Sep 08 First Farmers Holding Corporation (FFHC) Bagasse Cogeneration Plant

Spain ACM0006 ver. 5 119787

15 Mar 09 Biomass boiler project in the Philippines Japan AMS-I.C. ver. 12 18529


31 Jan 07 Paramount Integrated Corporation Methane Recovery and Electricity Generation

Great Britain AMS-I.A. ver. 8 AMS-III.D. ver. 9

7582

17 Dec 07 The Anaerobic Digestion Swine Wastewater Treatment With On-Site Power Bundled Project (ADSW RP1001)

Great Britain AMS-I.D. ver. 10 AMS-III.D. ver. 11

5806

01 Feb 08 Quezon City Controlled Disposal Facility Biogas Emission Reduction Project

Italy ACM0001 ver. 5 AMS-I.D. ver. 10

116339

24 Jun 08 MAKATI SOUTH SEWAGE TREATMENT PLANT UPGRADE WITH ON-SITE POWER

Great Britain AMS-I.D. ver. 10 AMS-III.H. ver. 4

28729

10 Mar 09 Montalban Landfill Methane Recovery and Power Generation Project

Great Britain ACM0001 ver. 6 AMS-I.D. ver. 12

589993

06 Apr 09 ANAEROBIC DIGESTION SWINE WASTEWATER TREATMENT WITH ON-SITE POWER PROJECT (ADSW RP2001)


2403

15 Jun 09 ANAEROBIC DIGESTION SWINE WASTEWATER TREATMENT WITH ON-SITE POWER PROJECT (ADSW RP2003)


8063

15 Jun 09 ANAEROBIC DIGESTION SWINE WASTEWATER TREATMENT WITH ON-SITE POWER PROJECT (ADSW RP2004)


4395

15 Jun 09 ANAEROBIC DIGESTION SWINE WASTEWATER TREATMENT WITH ON-SITE POWER PROJECT (ADSW) RP2006


2773

15 Jun 09 Anaerobic Digestion Swine Wastewater Treatment With On-Site Power Project (ADSW RP1002)


6679

17 Jun 09 ANAEROBIC DIGESTION SWINE WASTEWATER TREATMENT WITH ON-SITE POWER PROJECT


2679



1802



1415



6779



8144



12000



6442



2531

04 Sep 09 Anaerobic Digestion Swine Wastewater Treatment With On-Site Power Project (ADSW RP2007)


4003


10 Dec 06 20 MW Nasulo Geothermal Project Netherlands ACM0002 ver. 6 74975

* AM - Large scale, ACM - Consolidated Methodologies, AMS - Small scale ** Estimated emission reductions in metric tonnes of CO2 equivalent per annum


http://cdm.unfccc.int/methodologies/view?ref=ACM0002




http://cdm.unfccc.int/methodologies/view?ref=AMS-I.D.




http://cdm.unfccc.int/Projects/DB/TUEV-SUED1227779505.65/view

http://cdm.unfccc.int/methodologies/view?ref=AMS-I.C.



http://cdm.unfccc.int/methodologies/view?ref=AMS-I.A.

http://cdm.unfccc.int/methodologies/view?ref=AMS-III.D.












http://cdm.unfccc.int/methodologies/view?ref=AMS-III.H.

http://cdm.unfccc.int/Projects/DB/SGS-UKL1211828991.5/view
































































Annex 14 – Pictures from CDM Project Case Studies in the Philippines

1. Quezon City Controlled Disposal Facility Biogas Emission Reduction (Payatas)

Project visited: June 16th 2009.

Biogas facility near the dumpsite. Open landfill dumpsite in Payatas, Quezon City.

© Jens Marquardt (June 16th 2009) © Jens Marquardt (June 16th 2009)

2. NorthWind Bangui Bay Project (NorthWind Power Development Corporation)

Project visited: June 21st 2009.

Grid connection for the local population. Wind turbines located in Bangui Bay.

© Jens Marquardt (June 21st 2009) © Jens Marquardt (June 21st 2009)



3.Makati South Sewage Treatment Plant Upgrade (Philippines BioSciences)

Project visited: July 15th 2009.

Previous open sludge drying bed in Makati South. Methane gas conversion to electrical energy.

© San Carlos Bioenergy Inc. (December 11th 2007) © Jens Marquardt (December 13th 2007)

4. San Carlos Renewable Energy Project (Bronceoak Inc.)

Project visited: July 27th 2009.

Sugarcane distillery in San Carlos. Negros is Philippines’ prime sugar producing area.



© San Carlos Bioenergy Inc. (July 28th 2009) © Jens Marquardt (July 27th 2009)

Annex 15 – Total Primary Energy Supply (TPES) in India and China

> Figure 9.19: Share of Total Primary Energy Supply (TPES) in India and China



Source: International Energy Agency (http://data.iea.org) [retrieved: 29.1.2010]

Annex 16 - CDM Eligibility and Approval Criteria for India from the Ministry of Environment and Forestry Source: http://www.cdmindia.nic.in/host_approval_criteria.htm [Retrieved: 12.2.2010] Purpose: The purpose of the clean development mechanism (CDM) is defined in Article 12 of the Kyoto Protocol to the United Nations Framework Convention on Climate Change. The CDM has a two-fold purpose: (a) to assist developing country Parties in achieving sustainable development, thereby contributing to the ultimate objective of the Convention, and (b) to assist developed country Parties in achieving compliance with part of their quantified emission limitation and reduction commitments under Article 3. Eligibility: The project proposal should establish the following in order to qualify for consideration as CDM project activity: Additionalities:

• Emission Additionality: The project should lead to real, measurable and long term GHG mitigation. The additional GHG reductions are to be calculated with reference to a baseline.

• Financial Additionality: The procurement of Certified Emission Reduction (CERs) should not be from Official Development Assistance (ODA)

Sustainable Development Indicators: It is the prerogative of the host Party to confirm whether a clean development mechanism project activity assists it in achieving sustainable development. The CDM projects should also be oriented towards improving the quality of life of the poor from the environmental standpoint. The following aspects should be considered while designing CDM project activities:

1. Social well being: The CDM project activity should lead to alleviation of poverty by generating additional employment, removal of social disparities and contribution to provision of basic amenities to people leading to improvement in quality of life of people.

2. Economic well being: The CDM project activity should bring in additional investment

http://www.cdmindia.nic.in/host_approval_criteria.htm



consistent with the needs of the people.

3. Environmental well being: This should include a discussion of impact of the project activity on resource sustainability and resource degradation, if any, due to proposed activity; bio-diversity friendliness; impact on human health; reduction of levels of pollution in general;

4. Technological well being: The CDM project activity should lead to transfer of environmentally safe and sound technologies that are comparable to best practices in order to assist in upgradation of the technological base. The transfer of technology can be within the country as well from other developing countries also.

Baselines: The project proposal must clearly and transparently describe methodology of determination of baseline. It should confirm to following: • Baselines should be precise, transparent, comparable and workable; • Should avoid overestimation; • The methodology for determination of baseline should be homogeneous and reliable; • Potential errors should be indicated; • System boundaries of baselines should be established; • Interval between updates of baselines should be clearly described; • Role of externalities should be brought out (social, economic and environmental); • Should include historic emission data-sets wherever available; • Lifetime of project cycle should be clearly mentioned;

The project proponent could develop a new methodology for its project activity or could use one of the approved methodologies by the CDM Executive Board. For small scale CDM projects, the simplified procedures can be used by the project proponent. The project proposal should indicate the formulae used for calculating GHG offsets in the project and baseline scenario. Leakage, if any, within or outside the project boundary, should be clearly described. Determination of alternative project, which would have come up in absence of proposed CDM project activity should also be described in the project proposal.

Annex 17 - CDM Projects in India: Barrier Analysis and SD (sample)

> Figure 9.20: Barrier Analysis and Sustainable Development (Sample India)

solar (2)

wind (14)

hydro (18)

biomass (11)

biogas (5)

geo-thermal

(0)

all (50)



mandatory regulations

for solar missing /

high investment costs (2)

low financial returns / high capital cost / tariff policy can change quickly (14)

small scale projects not attractive /

little revenues compared coal / high capital

cost (15)

biomass only seasonal

available / generation per

kW costly / high tariff rates (10)

financially unattractive

based on prize per kW (5)

-- 46


very uncommon

and not traditional technology

(2)

use of new technology /

delays in construction

(4)

small scale projects not

very well developed in

India (5)

technology not implemented before / lack of experience

/ lack of proper

logistics (9)

no experience / lack of

skilled labour / methane

extraction not predictable

(5)

-- 25


--

risk of irregular

policy change / tariff

patterns varying in states (9)

delays to get approval from authorities /

changing policies /

reluctance of institutions (9)

lack of national RE

policy implemented and general

policy support (2)

restrict to sell surplus energy

by a state electricity board (2)

-- 22


solar lamps no tradition / education needed /

(1)

--

local population afraid of

displacement (2)

--

limited knowledge

and organisational capacity (3)

-- 6

other barriers --

problems with transmission

and grid authorities

uncertainty about the

availability of water /

imbalances in the grid might

lead to tripping of the

-- -- 15



(3) geology risks (11)

plant (1)



-- -- (3) (1) -- --


Impacts on the Environment (“Environmental Well Being”)

mitigate GHG emissions 2 14 18 11 5 -- all

use clean energy and protect environment (in addition to GHG reduction)

2 12 15 7 5 -- 41

Socio-economic Impacts (“Social and Economic Well Being”)


2 11 14 7 5 -- 39


1 14 18 11 2 -- 46


2 1 2 1 2 -- 8

Further Political and Technological Impacts (“Technological Well Being”)

help to stimulate growth of RE in India

-- 2 -- 2 -- -- 4

pilot project,demonstration -- 4 3 2 4 -- 13

technology transfer -- -- -- -- -- -- none

Out of 379 energy industries related projects in India (December 2009), 50 have been selected. CDM Host country: Republic of India


wind power (14 projects)

hydropower (18 projects)

biomass(11 projects)

biogas (5 projects)

geothermal (0 projects)

(50 projects)

603 This number needs to be added to “investment barriers ”. The “Tool for the demonstration and assessment of additionality” states that project participants may choose to apply Step 2 (Investment analysis) OR Step 3 (Barrier analysis) to demonstrate additionality. Most projects do both.



Registered Title Annex 1 Parties Methodology* Reductions**

22 Aug 06 Solar steam for cooking and other applications Germany AMS-I.C. ver. 7 562

10 Aug 09 Rural Education for Development Society (REDS) CDM Photovoltaic Lighting Project

AMS-I.A. ver. 12 21060


19 Feb 06 Nagda Hills Wind Energy Project (India) Japan AMS-I.D. ver. 6 11120

22 Apr 06 12.3 MW wind energy project in Tamil Nadu, India Switzerland AMS-I.D. ver. 7 14416

29 Apr 07 14.85 MW Grid connected Wind farm project, at various locations in Tamil Nadu, by M/s Goyal MG Gases Private Limited

Japan AMS-I.D. ver. 10 27963

05 Nov 07 2.5 MW BEL grid-connected wind power project at Davanagere district, Karnataka, India

AMS-I.D. ver. 10 5360

15 Nov 07 4 MW Bundled Grid Connected Wind Power Project in Tamilnadu, India

AMS-I.D. ver. 10 8140

19 Nov 07 3 MW Wind Power Project at Chikkasiddavanahalli village, Chitradurga district, Karnataka

AMS-I.D. ver. 10 4823

01 Feb 08 75MW wind power project in Maharashtra by Essel Mining Industries Limited

ACM0002 ver. 6 118203

22 Mar 08 Generation of electricity from 12.8 MW capacity wind mills by Avinash Bhosale group at Bhambarwadi, Maharashtra

Germany AMS-I.D. ver. 10 20327

27 Oct 08 Enercon Wind Farm (Hindustan) Ltd in Karnataka ACM0002 ver. 6 148858

31 Jan 09 Wind Electricity Generation Project ACM0002 ver. 6 80937

10 Jun 09 12 MW Wind Power Project in Kutch, Gujarat AMS-I.D. ver. 13 21699

05 Oct 09 KL Rathi Steels 1.5 MW Wind Power Project at Kutch District, Gujarat

AMS-I.D. ver. 13 2710

11 Oct 09 100 MW Wind Power Project by RS India Wind Energy Pvt. Ltd. at Matrewadi & Varekrwadi, Satara district in Maharashtra

ACM0002 ver. 7 177980

15 Dec 09 1.5 MW Grid connected Wind Electricity Generation at Tirunelveli District, Tamilnadu, India by Kallam Agro Products and Oils Private Limited

AMS-I.D. ver. 13 3796


18 Jul 05 5 MW Dehar Grid-connected SHP in Himachal Pradesh, India


16 Dec 05 10.25MW Chunchi Doddi Grid-connected SHP in Karnataka, India


11 Feb 06 6MW Somanamaradi grid connected SHP in Karnataka, India


30 Apr 06 Lohgarh, Chakbhai and Sidhana Mini Hydroelectric Projects

GREAT BRITAIN AMS-I.D. ver. 7 25347

30 Sep 06 Mahatma Gandhi Hydro Electric Tail Race Hydro Power Project of APPL, India

Japan ACM0002 ver. 6 95795

08 Jan 07 22.5 MW Bhilangana Hydro Power Project (BHPP) ACM0002 ver. 6 109304

23 Mar 07 Varahi Tail Race Small Hydro Power Project of SPCL in Karnataka, India

Switzerland ACM0002 ver. 6 100386

01 Jun 07 20MW Samal Grid-connected Hydroelectric Project in Orissa, India

ACM0002 ver. 6 106789





http://cdm.unfccc.int/methodologies/view?ref=AMS-I.A.

http://cdm.unfccc.int/Projects/DB/RWTUV1135356510.37/view


http://cdm.unfccc.int/Projects/DB/BVQI1140597448.95/view












http://cdm.unfccc.int/Projects/DB/TUEV-RHEIN1188180106.74/view




















































* AM - Large scale, ACM - Consolidated Methodologies, AMS - Small scale

** Estimated emission reductions in metric tonnes of CO2-equivalent per annum

(as stated by the project participants)

25 Nov 07 2.2 MW hydropower plant in Birsinghpur, Madhya Pradesh of Ascent Hydro Projects Limited (AHPL)

Netherlands AMS-I.D. ver. 11 13582

30 Mar 08 1.5 MW Deogad hydroelectric project in Maharashtra, district Sindhudurg, India by M/s Gadre Marine Export

AMS-I.D. ver. 10 3663

27 May 08 Someshwara small hydropower project (24.75 MW) in Karnataka, India

ACM0002 ver. 6 70144

29 Oct 08 Baragran Hydro Electric Project, 3.0 MW (being expanded to 4.9 MW)

AMS-I.D. ver. 11 17802

18 Mar 09

Modification and retrofitting of the existing 34 MW hydropower plant at Bhandardara -2 (project activity) in Maharashtra state in India by Dodson – Lindblom Hydro Power Private Limited (DLHPPL)

ACM0002 ver. 6 15914

07 May 09 Budhil Hydro Electric Project, India (BHEP) ACM0002 ver. 6 251513

09 Jun 09 10 MW Bhavani Barrage-1 Small Hydroelectric Project for a Grid connected system, Tamil Nadu , India

AMS-I.D. ver. 13 14140

26 Oct 09 5 MW Chirchind Grid-Connected SHP in Himachal Pradesh, India

AMS-I.D. ver. 13 16861

30 Oct 09 10 MW Bhavani Barrage-2 Small Hydroelectric Project for a Grid connected system, Tamil Nadu, India

AMS-I.D. ver. 13 14140

16 Nov 09 24 MW Shamburi Mini Hydel Project, Karnataka, India ACM0002 ver. 7 63643


23 May 05 Biomass in Rajasthan - Electricity generation from mustard crop residues

Netherlands AMS-I.D. ver. 5 31374

06 Aug 05 Clarion 12MW (Gross) Renewable Sources Biomass Power Project


17 Mar 07 Bagasse based Co-generation Project at Nanglamal Sugar Complex.

Sweden Spain

ACM0006 ver. 3 65493

08 Apr 07 Grid connected 13MW biomass power project in Maharashtra


08 Sep 07 10 MW biomass based renewable energy generation for the grid in Amaravathi District of Maharashtra

Switzerland AMS-I.D. ver. 10 43345

06 Jan 08 6 MW Rice Husk based cogeneration plant at Bhageshwari Papers Private Limited

AMS-I.C. ver. 9 28983

26 May 08 Rice husk based Co generation project at Dujana unit of KRBL Limited

AMS-I.D. ver. 10 17781

28 Nov 08 20 MW Bagasse Based Co-generation Power Project at Bannari Amman Sugars Limited, Nanjangud, Karnataka

ACM0006 ver. 4 72158

12 Jan 09 10 MW Biomass based renewable energy generation for the grid, Jalagon District, Maharashtra, India

AMS-I.D. ver. 12 39162

04 Mar 09 3.76 MW Electricity Generation project from Poultry Litter in Tamil Nadu

AMS-I.D. ver. 13 AMS-III.D. ver. 13

55858

04 Dec 09 Biomass based power project at T-Kallupatti village, Madurai District, Tamil Nadu, India

AMS-I.D. ver. 13 58291


03 Sep 06 SIDPL Methane extraction and Power generation project

Switzerland Sweden France

AMS-I.D. ver. 8 AMS-III.H. ver. 1

31966

29 Sep 06 Methane recovery and power generation in a distillery plant

GREAT BRITAIN AMS-III.H. ver. 1 AMS-I.D. ver. 8

44729

12 Jan 07

Generation of Electricity through combustion of waste gases from Blast furnace and Corex units at JSW Steel Limited (in JPL unit 1), at Torangallu in Karnataka, India

Switzerland GREAT BRITAIN

ACM0004 ver. 1 767325

12 Jan 07 Use of waste gas use for electricity generation at JSW Energy Limited

GREAT BRITAIN ACM0004 ver. 1 811566

28 Aug 09 Biogas CDM Project of Bagepalli Coolie Sangha AMS-I.C. ver. 13 AMS-I.E.

42855




http://cdm.unfccc.int/Projects/DB/LRQA%20Ltd1200388742.65/view

http://cdm.unfccc.int/Projects/DB/LRQA%20Ltd1200388742.65/view














































































http://cdm.unfccc.int/methodologies/view?ref=AMS-I.E.



Annex 18 - CDM Projects in China: Barrier Analysis and SD (sample)

> Figure 9.21: Barrier Analysis and Sustainable Development (Sample China)

solar (2)

wind (16)

hydro (17)

biomass (6)

biogas (9)

geo-thermal

(0)

all (50)



investment barriers (2)

investment barriers /

tariff barriers (9)

prize in rural areas not affordable

compared to coal / large

initial investment (4)

cost per kW with biomass higher than fossil fuels / tariff barrier

(6)

large upfront payments /

financial uncertainties / no preferred

taxation (5)

-- 26


--

high risk technology /

lack of capacity (6)

SHP projects in remote

areas / new technology (2)

skilled labour + technology

needed / technology not

common (5)

conditions of landfills / lack of experience

(4)

-- 17


-- laws and

regulations (1)

bureaucratic institutional

framework (2) --

uncommon practise due to existing policy (1)

-- 4


-- -- -- --

lack of awareness

among farmers (1)

-- 1

other barriers -- --

natural disasters / bad

geological conditions (1)

-- -- -- 1



-- (7) (13) (4) --


Impacts on the Environment

mitigate greenhouse gas emissions

2 16 17 6 9 -- 50

use clean energy and protect environment (additional to GHG reduction)

2 14 9 3 6 34

Socio-economic Impacts


2 11 9 2 7 -- 31


-- 13 14 4 8 -- 39


-- -- 1 -- 1 -- 2

Further Political and Technological Impacts

help to stimulate growth of RE in China

-- 9 1 3 1 -- 14

pilot project, for demonstration

-- 3 1 3 -- 7

technology transfer -- 1 1 2 -- 4

604 This number needs to be added to “investment barriers ”. The “Tool for the demonstration and assessment of additionality” states that project participants may choose to apply Step 2 (Investment analysis) OR Step 3 (Barrier analysis) to demonstrate additionality. Most projects do both.



Out of 644 energy industries related projects in China (December 2009), 50 have been selected. CDM Host country: People’s Republic of China


wind power (16 projects)

hydropower (17 projects)

biomass(6 projects)

biogas (9 projects)

geothermal (0 projects)

(50 projects)


25 Mar 09 Federal Intertrade Pengyang Solar Cooker Project Netherlands AMS-I.C. ver. 12 35723

31 May 09 Federal Intertrade Hong-Ru River Solar Cooker Project

Netherlands AMS-I.C. ver. 12 35723


26 Jun 05 Huitengxile Windfarm Project Netherlands AM0005 51429

23 Mar 06 Zhangbei Manjing Windfarm Project Switzerland GREAT BRITAIN

AM0005 94095

09 Aug 06 Jilin Taobei Huaneng 49.3MW Wind Power Project Spain ACM0002 ver. 6 94098

31 Dec 06 Inner Mongolia Chifeng Dongshan 49.3 MW Wind Power Project


07 Apr 07 Jilin Tongyu Tuanjie wind project, 100.3 MW Austria ACM0002 ver. 6 254772

06 May 07 Jiaojiping Hydroelectric Project Netherlands ACM0002 ver. 6 266048

30 Nov 07 The Wulabo 30 MW Wind-Farm Project in Urumqi, Xinjiang of China


24 Oct 08 Inner Mongolia Chifeng Bolike 50MW Wind Power Project


26 Oct 08 Hebei Chengde Huifeng Windfarm Project GREAT BRITAIN ACM0002 ver. 6 114873

20 Dec 08 Goldwind Damao Wind Farm Project GREAT BRITAIN ACM0002 ver. 6 127104

29 Dec 08 Hebei Shirenshan Wind Power Project GREAT BRITAIN ACM0002 ver. 6 122445

19 Jan 09 Heilongjiang Huanan Hengdaishan West Wind Power Project

Austria ACM0002 ver. 6 102754

28 Jan 09 CGN Inner Mongolia Huitengliang 300MW Wind Power Project


06 Mar 09 Hebei Haixing 49.5MW Wind Farm Project Japan ACM0002 ver. 6 117356

24 Sep 09 Shanghai Dong Hai Bridge Offshore Wind Farm Project


28 Dec 09 Heilongjiang Shaobaishan Wind Power Project Switzerland ACM0002 ver. 8 128442


18 Dec 05 Yuzaikou Small Hydropower Station Sweden, Austria, GREAT BRITAIN

AMS-I.D. ver. 6 40480

15 Jul 07 Yunnan Heier 25MW Hydropower Project Netherlands ACM0002 ver. 6 96046

28 May 08 Luojiaohe 20MW Hydro Power Project in Guizhou Province China

Germany ACM0002 ver. 6 51464

09 Jul 08 Changwa 10 MW Small-scale Hydro Project Japan AMS-I.D. ver. 10 31469

07 Aug 08 Yunnan Yuanjiang Lutong Hydropower Station Switzerland Austria

AMS-I.D. ver. 12 44630

09 Sep 08 China Tumuxi Small Hydropower Project GREAT BRITAIN AMS-I.D. ver. 11 40615

24 Oct 08 Hubei Xiakou Hydropower Project of Nanzhang County, Xiangfan City, Hubei Province, P.R. China

Netherlands ACM0002 ver. 6 66208

18 Dec 08 Yangliutan Hydro Power Project Netherlands ACM0002 ver. 6 185167

26 Jan 09 Fujian Zhouning Houlong 40MW Hydropower Project


26 Jan 09 Sichuan Erdaoqiao Hydropower Project Japan ACM0002 ver. 6 208868

13 Feb 09 Sichuan Greenleaf (Lvye) 60MW Hydropower Project


29 Mar 09 Xinjiang Uygur Autonomous Region Tekesi River Shankou Hydropower Station








http://cdm.unfccc.int/methodologies/view?ref=AM0005




































































11 May 09 Gansu Datonghe Tiecheng Hydropower Station Project


12 May 09 Sichuan Guohe 20MW Hydropower Project GREAT BRITAIN ACM0002 ver. 6 106951

18 Jun 09 Sichuan Ya’an Shaping Hydropower Station Project


14 Jul 09 Shijiazhou 45MW Hydropower Project in Hunan Province, China


02 Jan 10 Hubei Enshi LaodGreat Britainou Hydropower Station



12 Mar 07 Shandong Yucheng Xinyuan Biomass Heat & Power (“Yucheng Biomass CHP”)

Japan GREAT BRITAIN

ACM0006 ver. 3 189552

16 Mar 07 Henan Luyi 25MW Biomass Cogeneration Project GREAT BRITAIN ACM0006 ver. 3 185664

19 Mar 07 Zhongjieneng Jurong 2*12MW Biomass Direct Burning Power Plant Project


04 Jun 09 Jiangsu Rudong Biomass Power Generation Project

GREAT BRITAIN ACM0002 ver. 7 ACM0006 ver. 6

143751

20 Aug 09 Anhui Anqing 30MW Biomass Power Generation Project


02 Nov 09 Heilongjiang Wangkui 50MW Level Biomass Cogeneration Project



18 Dec 05 Nanjing Tianjingwa Landfill Gas to Electricity Project

Switzerland GREAT BRITAIN

ACM0001 ver. 1 AMS-I.D. ver. 6

246107

09 Apr 07 Wuxi Taohuashan Landfill Gas to Electricity Japan ACM0001 ver. 4 AMS-I.D. ver. 9

75343

06 Apr 07 Installation of waste heat recovery system in a coking plant in Qian’an City, China


06 Jul 08 Kunming - Wuhua Landfill Gas to Energy Project GREAT BRITAIN ACM0001 ver. 5 AMS-I.D. ver. 11

143602

19 Feb 09 Hubei Eco-Farming Biogas Project Phase I Netherlands AMS-III.R. AMS-I.C. ver. 12

58444

25 Jun 09 Taiyuan Xingou Landfill Gas Recovery and Utilization Project

Switzerland AMS-I.C. ver. 13 AMS-III.G. ver. 6

43419

04 Sep 09 Methane Recovery Project of Huguan Yufeng Brewing Co., Ltd.

Japan AMS-I.C. ver. 13 AMS-III.H. ver. 9

72483

09 Nov 09 Jiangsu Wangting Natural Gas Based Power Generation Project

GREAT BRITAIN AM0029 ver. 2 1065397

20 Dec 09 Guangzhou Zhujiang Beer Methane Recovery Project

Switzerland AMS-III.H. ver. 13 AMS-I.D. ver. 13

35780

* AM - Large scale, ACM - Consolidated Methodologies, AMS - Small scale

** Estimated emission reductions in metric tonnes of CO2-equivalent per annum

(as stated by the project participants)









http://cdm.unfccc.int/Projects/DB/JCI1239168145.02/view






































http://cdm.unfccc.int/methodologies/view?ref=AMS-III.R.





http://cdm.unfccc.int/methodologies/view?ref=AMS-III.G.












Affidavit

I hereby declare that I have written this thesis on my own and without the

use of any other than the cited sources and tools and all explanations that I

copied directly or in their sense are marked as such.

Furthermore, I conform that as well as that the thesis has not yet been

handed in neither in this nor in equal form at any other official

commission.

I do agree that a sample of my thesis can be borrowed in the library.

Eidesstattliche Erklärung

zur Diplomarbeit

Hiermit versichere ich, dass ich die Diplomarbeit selbständig und lediglich

unter Benutzung der angegebenen Quellen und Hilfsmittel verfasst habe.

Ich versichere außerdem, dass die vorliegende Arbeit noch nicht einem

anderen Prüfungsverfahren zugrunde gelegen hat.

Ich bin damit einverstanden dass ein Exemplar meiner Diplomarbeit in der

Bibliothek ausgeliehen werden kann.

Berlin, 17.2.2010

(Jens Marquardt)