BEIJING (Reuters) - The architects of a new global climate change deal should not lose sight of the achievements already made, despite calls for wholesale reform, a senior executive with Italian power giant Enel said on Saturday.
The clean development mechanism (CDM), set up under the Kyoto Protocol, enables rich countries to meet their carbon reduction targets by investing in clean energy projects in the developing world, which are granted tradable “certified emission reductions” (CERs) by the United Nations.
Opponents call for far-reaching changes, saying the current mechanism has been hijacked by commercial interests and is not delivering the promised carbon emission cuts, but Giuseppe Deodati, Enel’s head of carbon strategy, told Reuters in Beijing that there was no reason for it to be ditched.
“There are good points to defend about the CDM market and a lot of good points to be saved,” he said.
The Kyoto Protocol will expire at the end of 2012, and negotiators need to thrash out a replacement by the time they meet in Copenhagen at the end of this year.
Enel has been “an early mover” in China’s CDM sector as it tries to meet its own mandatory C02 reduction targets, Deodati said.
As well as developing energy efficiency projects, the company’s focus in China has also been on hydropower and reducing industrial gases like HFC-23.
China has been a crucial part of Enel’s strategy to “minimize (Kyoto) compliance costs,” he said.
And that has been the problem with the CDM, critics say. The current regime allows western countries to meet their targets on the cheap, and the financing available through carbon trading could be better employed elsewhere.
The European Union’s executive arm said in January that credits should only be granted to “those projects that deliver real additional reductions and go beyond low-cost options.”
Some have gone further, calling for industrial gas abatement projects to be eliminated from any post-2012 agreement and stripped of their carbon credits.
But despite the criticism, HFC 23 remains a potent greenhouse gas, Deodati said.
“It has yet to be decided what sort of restrictions will be applied to this kind of project... but we need to bear in mind that for industrial gases like HFC 23, we have the biggest proportion of greenhouse gas abatements that have been developed so far. We shouldn’t forget that.”
Enel was also involved in the development of the biggest CDM hydropower project — Bingling on the upper reaches of China’s Yellow River.
“A lot of concerns about the environmental sustainability (of hydropower) have been discussed, but it is also true that up to now, these initiatives have been able to bring real reductions in greenhouse gases.”
CDM developers are currently in a state of uncertainty. As opponents call for far-reaching changes, no one knows how much of the current trading regime will survive, and how much their CERs will actually be worth after 2012.
“Enel’s hopes are very much in line with other developers in this sector - that a predictable regulatory context will result from the negotiations,” Deodati said.
“That will make it possible for operators to make rational investment decisions.”
Reporting by Beijing Newsroom; Editing by Victoria Main