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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

“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.

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

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

:: 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.

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

global

The CDM as a global regime

Theoretical work on the links between domestic politics and international regimes was examined.

Implementing renewable energy in developing countries

An analytic framework on barriers for RE in developing countries has been developed.

Experience from CDM projects in the Philippines + India and China

Barriers from a sample of renewable energy projects from every country have been examined.

CDM projects on the ground and interviews in the Philippines

Four projects have been visited and further interviews conducted for empirical data.

local

Source: Illustration by the author.

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)!”

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

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 nonstate 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

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

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 privateowned 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

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


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

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.

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

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

:: 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 2.3.2 Barriers to CDM Projects and Global Distribution 2.3.3 Renewable Energy: General Barriers and Perspectives under the CDM

3 Theory: International Regimes and Domestic Politics

13 16 19

23-44

3.1 Theoretical Background: Effectiveness of Environmental Regimes 23 3.1.1 Polity, Politics and Policy: The Complexity of Political Dimensions 3.1.2 Effective Implementation of International Environmental Commitments 3.1.3 Defining the CDM as an International Regime

23 25 29

3.2 Three Dimensions of Interaction: International, National and Local 32 3.2.1 Beyond Bargaining: How Domestic Politics Affect Implementation 3.2.2 The Impact of Internationalization on Domestic Politics 3.2.3 Bringing the Local Level Into Account

3.3 Synthesis: Towards a Three-Dimensional Approach

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33 36 40

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

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 4.2.2 4.2.3 4.2.4

Political and Socio-Economic Framework Conditions Potentials for Renewable Energy Sources in the Philippines The Energy Sector: Laws and Regulations (Policy) in the Philippines Promoting Renewable Energy: Actors (Polity) and Processes (Politics)

4.3 Implementing the CDM in the Philippines 4.3.1 Changing the Political Environment: New Authorities and Regulations 4.3.2 Implementation Rules and Procedures 4.3.3 Renewable Energy Project Activities in the Philippines

4.4 Experiences from the Ground: CDM Projects in the Philippines 4.4.1 4.4.2 4.4.3 4.4.4

Makati South Sewage Treatment Plant Upgrade (Philippines BioSciences) NorthWind Bangui Bay Project (NorthWind Power Development Corp.) Quezon City Controlled Disposal Facility (Payatas) San Carlos Renewable Energy Project (Bronceoak Inc.)

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

5 Comparison: CDM Projects in India and China 5.1 Promoting Renewable Energy Through the CDM in India 5.1.1 5.1.2 5.1.3 5.1.4

Potentials and Framework Conditions for Renewables in India The Energy Sector in India: Policy, Polity and Politics Implementing CDM Projects in India Renewable Energy CDM Projects in India: Barriers and Perspectives

5.2 Promoting Renewable Energy Through the CDM in China 5.2.1 5.2.2 5.2.3 5.2.4

Potentials and Framework Conditions for Renewables in China The Energy Sector in China: Policy, Polity and Politics Implementing CDM Projects in China Renewable Energy CDM Projects in China: Barriers and Perspectives

48 50 52 54

56 56 58 58

62 63 64 66 67

69

74-101 76 77 80 83 84

87 89 92 95 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

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

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

Annex 9

146

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

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

:: 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: Figure 2.2: Figure 2.3:

National Policy to Promote Renewable Energy (table) Barriers for Renewable Energy Technologies Global Distribution of Registered CDM Projects (map)

9 12 16

Chapter 3 - Theory: International Regimes and Domestic Politics Figure Figure Figure Figure Figure

3.1: 3.2: 3.3: 3.4: 3.5:

Forms and Characteristics of Political Dimensions Areas for the CDM to Influence Political Decisions Three Criteria of Effectiveness and Various Indicators Three Dimensions of Interactions Independent and Dependent Variables of this Thesis

24 24 29 43 44

Chapter 4 - Domestic Politics: The Republic of the Philippines Figure 4.1: Figure 4.2:

CDM Projects in the Philippines: Location of the Case Studies (map) 62 Wilkins’ Analytical Framework Applied to the Philippines 70

Chapter 5 - Comparison: CDM Projects in India and China Figure Figure Figure Figure

5.1: 5.2: 5.3: 5.4:

CDM Projects in India (map) Wilkins’ Analytical Framework Applied to India CDM Projects in China (map) Wilkins’ Analytical Framework Applied to China

83 87 95 98

Chapter 6 - Conclusion and Perspectives Figure 6.1: Figure 6.2: Figure 6.3:

The Effectiveness of the CDM Regime Three Dimensions of Interactions under the CDM Regime Dependent Variable and Explaining Factors

106 109 111

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

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

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

:: List of Acronyms and Abbreviations ADB

Asian Development Bank

BAU BMU

Business As Usual Scenario (in the absence of the CDM project) Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit (German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety) Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung (German Federal Ministry for Economical Cooperation and Development)

BMZ

x

CCP CCS CDM CMD EB CER CH4 CIGAR CO2 CMP COP

Communist Party of the People’s Republic of China Carbon Capture and Storage Clean Development Mechanism Executive Board of the Clean Development Mechanism under the UNFCCC Certified Emission Reduction Unit Methane Covered In Ground Anaerobic Reactor Carbon Dioxide Conference of the Parties serving as the Meeting of the Parties Conference of the Parties (supreme decision-making body under the UNFCCC)

DENR DNA DOE

Department of the Environment and Natural Resources of the Philippines Designated National Authority (for the CDM) Department of Energy of the Philippines

EB EGTT ENVIS EPI EPIMB EPIRA ERC EREC ESI EU

Executive Board (of the CDM) Expert Group on Technology Transfer (under the UNFCCC) Environmental Information System (in India) Environmental Performance Index Electric Power Industry Management Bureau of the Philippines Electric Power Industry Reform Act (in the Philippines) Energy Regulatory Commission of the Philippines European Renewable Energy Council Environmental Sustainability Index European Union

GDP GEF GHG GTZ GW (GWh)

Gross Domestic Product Global Environmental Facility Greenhouse Gas Gesellschaft für Technische Zusammenarbeit (German Tehnical Cooperation) Gigawatt (Gigawatt Hour) with Watt as a unit of power

HDI HFCs

Human Development Index Hydroflourcarbons

IACCC IEA IETA IGES IPCC IPR

Inter-Agency Committee on Climate Change (in the Philippines) International Energy Agency International Emissions Trading Association Institute for Global Environmental Strategies Intergovernmental Panel on Climate Change International Property Rights Otto Suhr Institute for Political Science | Free University Berlin | © 2010


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

JI

Joint Implementation

KP kW (kWh)

Kyoto Protocol Kilowatt (Kilowatt Hour) with Watt as a unit of power

LDC LGUs

Least Developed Country Local Government Units in the Philippines

MDG MMBFOE MNRE MTOE MW (MWh)

Millennium Development Goal Million Barrels of Fuel Oil Equivalent Ministry of New and Renewable Energy in India Million Tons of Oil Equivalent Megawatt (Megawatt Hour) with Watt as a unit of power

NCCC NCDMA NDRC N20 NGO NPC

National Coordination Committee on Climate Change (in China) National Clean Development Mechanism Authority (DNA of India) National Development and Reform Commission (in China) Nitrous oxide Non-Governmental Organization National People’s Congress (in China)

OECD

Organization for Economic Cooperation and Development

PDD PFCs PhilBio

Project Design Document (mandatory for every CDM project) Perflourcarbons Philippines BioScience Corporation (CDM project developer)

R&D RE REN 21 RET

Research and Development Renewable Energy Renewable Energy Policy Network for the 21st Century Renewable Energy Technologies

SBSTA SD SERC SF6 SHP

Subsidiary Body for Scientific and Technical Advice (under the UNFCCC) Sustainable Development State Electricity Regulatory Commission(s) in India Sulphur hexafluoride Small hydro plant

TPES TERI

Total Primary Energy Supply Tata Energy Research Institute

UNCED UNCTAD UNDP UNEP UNFCCC USA USD

United Nations Conference on Environment and Development United Nations Conference on Trade and Development United Nations Development Program United Nations Environmental Program United Nations Framework Convention on Climate Change United States of America United States Dollar(s)

WCED WMO

World Commission on Environment and Development World Meteorological Organization

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

1

Introduction „No one country can win the battle against climate change acting alone. 2 Collective action is not an option but an imperative “

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. Nations are divided into “developed” or “industrialized” and “developing” countries according to economic and sociodemographic 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. 3

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

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 subquestions 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

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

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:

> Figure 1.1: Dependent Variable and Explaining Factors CDM Host Country technical factors economical factors

Domestic Politics

social factors

influence on effective implementation of CDM projects

Global Regime Effective CDM Regime

? overcome barriers for renewables / promote sustainable development / change policy, politics and polity

Source: Illustration by the author.

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

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

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.

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

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 nonbinding 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. 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 NaturforscherGermany, 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] 7

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

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 Mandate 13, 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 GHG 15 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 necessary 19 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. 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 (SF 6). 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. 13

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

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. 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). 22

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

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.

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

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 Feed-in tariff

Sweden

China

x

Renewable portfolio standard

India

Philippines

x 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

Public competitive bidding

x

x

x

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. 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. 38

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

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 46

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

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

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 climatefriendly 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 48 49 50 51 52 53

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

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

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.

> Figure 2.2: Barriers for Renewable Energy Technologies regional context and local environment

political, institutional and legislative barriers capacity on the ground: lack of infrastructure and knowledge

technical barriers

capital costs cost efficiency

Noise exposure etc.

economical barriers choice of location

social barriers

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

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 55 56 57 58 59

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

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

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 61 62 63 64 65

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

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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. 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. 67

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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.

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

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 CDM 88 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

> Figure 2.3: Global Distribution of Registered CDM Projects

   

= CDM project, Large scale, one location = CDM project, Large scale, several locations = CDM project, Small scale, one location = CDM project, Small scale, several locations

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

85

See Silayan, A. 2005, S. 10. 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. 86

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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 nonAnnex 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] 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). 92

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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 N 2O, 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. 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. 102

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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 CO 2 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 fuels 113 (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 109 110 111 112 113 114 115 116

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

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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 CO 2 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.

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“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.

124 125 126 127 128

BMU / Umweltbundesamt 2007: BMU / Umweltbundesamt 2007: BMU / Umweltbundesamt 2007: BMU / Umweltbundesamt 2007: See Flamos, Alexandros 2009.

p. p. p. p.

3. 3. 16. 16.

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“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 developers 135 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. 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. 130

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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. 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. 137

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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.

> Figure 3.1: Forms and Characteristics of Political Dimensions Policy

content of political debates / laws and regulations

Polity

form and structure / institutional aspects / legal system

Politics

decision-making processes / patters of interest groups’ interaction

- problem solving - task fulfilment - political organization - procedures - political structure - organizations - cooperation and conflicts - power - enforcement

Source: Illustration by the author adopted from Böhret, Carl/Jann, Werner/Kronenwett, Eva 1988.

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.

> Figure 3.2: Areas for the CDM to Influence Political Decisions problem identification

Clean Development Mechanism

?

evaluation

adoption

agenda setting

implemen -tation

policy formulation

Source: Illustration by the author adopted from Jann / Wegrich 2003: p. 82. 139 140

Kilpatrick, D. "Definitions of Public Policy and Law" (musc.edu/vawprevention/policy/definition) [retrieved: 12.2.2010] Jann / Wegrich 2003: p. 82.

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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. 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. 142

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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. 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. 148

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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. 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. 153

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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 overcome overcome overcome

investment barriers and make RE projects financially attractive technical barriers and promote knowledge and technology transfer political barriers and change prevailing practises 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.

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   

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

> Figure 3.3 Three Criteria of Effectiveness and Various Indicators -

overcome barriers to renewable energy - natural environment - livelihood of people - pilot projects

promotion of sustainable development

Effectiveness of the CDM changing the political environment

investment barriers technical barriers political barriers social barriers

-

raise awareness affect policy affect polity affect politics

Source: Illustration by the author.

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. 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. 164

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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

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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.

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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. 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 policymaking on the global, national and local level. 189 See Young, O. 1989 as one example. 187

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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 intergovernmental 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 transnationalism (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 interact 196 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.

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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)

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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. 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. 208

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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.

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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.

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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. 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. 224

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“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. 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. 230

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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 collectiveaction 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.

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“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, subnational 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 climatefriendly 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). 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. 243

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“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.

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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.

> Figure 3.4: Three Dimensions of Interactions Potentials (+) and barriers (-) for effective outcomes:

+

voluntary action combined with binding regulations

-

no direct impact on policy translation

national dimension

(a)

international dimension domestic pressure

(c)

learning from best practice

implementation review and voluntary action

constraints during no direct link to ratification international level top-down facilitation with incentives lack of national capacity

disregarding local conditions

(b)

serving as a testing ground for experiments opposing forces to national policies

local dimension

Source: Illustration by the author.

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.

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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.

> 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.

Source: Illustration by the author.

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.

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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. 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. 256

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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 resources 263 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. 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. 263

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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. 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. 277

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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. 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. 293

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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 sitespecific 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. 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. 305

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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 picohydros (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. 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/philippinesdeveloping-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. 315

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“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 Philippines

323

“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. 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. 322

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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. 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] 332

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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. 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 341

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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)

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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 354 355 356 357 358 359

E.g. the National Action Plan on Climate Change. that has not been implemented into developing plans so far. Interview with Scholz, Uwe (19.6.2009). World Bank 2007(a) p. 1. World Bank 2007(a) p. 2. World Bank 2007(a) p. 2. Interview with Scholz, Uwe (19.6.2009).

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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 InterAgency 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 foreignowned 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.

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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]

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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. 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] 375

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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. 377 378 379

PDD: http://cdm.unfccc.int/Projects/DB/DNV-CUK1188881363.25/view [retrieved: 12.2.2010] PDD: http://cdm.unfccc.int/UserManagement/FileStorage/RR5ECSW434FDHPTXRJ3YBCL49RCK24 [retrieved: 12.2.2010] PDD: http://cdm.unfccc.int/UserManagement/FileStorage/USBIRW8KEMD9CQJOZ1NYT62XHPLAV4 [retrieved: 12.2.2010]

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(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

380 381 382 383 384

PDD: PDD: PDD: PDD: PDD:

http://cdm.unfccc.int/UserManagement/FileStorage/ITT4XCO6F4KVVAYAE1IB3TVPNRF3QX [retrieved: 12.2.2010] http://cdm.unfccc.int/UserManagement/FileStorage/XKG2H3VVI59T07P953BBUDNBE7AJGR [retrieved: 12.2.2010] http://cdm.unfccc.int/UserManagement/FileStorage/6OXT0T0ICF9J4BYTPBRPIKCNCLIJXW [retrieved: 12.2.2010] http://cdm.unfccc.int/UserManagement/FileStorage/RR5ECSW434FDHPTXRJ3YBCL49RCK24 [retrieved: 12.2.2010] http://cdm.unfccc.int/UserManagement/FileStorage/USBIRW8KEMD9CQJOZ1NYT62XHPLAV4 [retrieved: 12.2.2010]

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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

> Figure 4.1: CDM Projects in the Philippines: Location of the Case Studies NorthWind Bangui Bay Project Quezon City Controlled Disposal Facility Makati South Sewage Treatment Plant Upgrade

San Carlos Renewable Energy Project Projects are clustering around Metro Manila and in Luzon mostly due to CDM activities in extensive animal farms that reduce biogas. Map based on data from the UNFCCC [retrieved: 12.2.2010] (http://cdm.unfccc.int/Projects/MapApp/index.html)

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?386 385 386

Pictures from all four project sites can be found in Annex 14 of this paper. The section “Interviews, Events and Project Case Studies” (pp. 128-129) provides the guiding questions for the interviews.

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4.4.1 Makati South Sewage Treatment Plant Upgrade (Phil. BioScience)

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(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]

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(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]

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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.

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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]

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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

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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]

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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

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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.

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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.

> Figure 4.2: Wilkins’ Analytical Framework Applied to the Philippines In the Philippines, a wide range of RE sources is available. The political Laws to promote renewable energy exist – but are often framework is supportive only not specific. This has changed with the Renewable Energy Law at a first glance. Factors in 2008. Local barriers are strong during implementation. like corruption and bureaucracy Domestic capacity and is supported are strong by the CDM; pilot projects demonstrate barriers. feasibility. Yet, strong scepticism towards new technologies exists. Technical barriers are reduced with the help of the CDM. New technologies and knowledge are partly transfered to the Philippines. Noise exposure etc.

Investment barriers are mostly minimized or eliminated by the CDM. Still there are financial barriers to renewable energy. cost This has changed with the efficiency Renewable Energy Law in a positive way. choice of location capital costs

There is a very active and broad civil society. Environmentalists demand more action for renewables, but have only indirect influence.

Source: Illustration by the author based on Wilkins 2002.

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

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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.”394 392 393 394

Kazuhisha Koakutso is Market Mechanism Sub Manager at the IGES Japan (Interview with Koakutso, Kazuhisha, 6.12.2008) Interview with Sandee G. Recabar, 6.12.2008. Tuazon, A. 2008: p. 21.

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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 shortterm 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 395 396

Catherine Paredes Maceba, spokesperson of the “Renewable Energy Coalition” (Interview with Maceba, 17.6.2009). Various barriers were mentioned in this paper, but especially technical and social ones could not be discussed in depth.

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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.

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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. 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. 399

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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-byproject 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. 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. 403

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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. 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. 407

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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.

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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 wellestablished 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. The Times of India 18.9.2009: “India targets 1,000mw solar power in 2013” (timesofindia.indiatimes.com/india/Indiatargets-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. 418

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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 425 426 427 428 429 430 431 432

Wagner, Christian 2006: pp. 91ff. Wagner, Christian 2006: pp. 98ff. Data in this chapter mainly from World Bank 2009 (a). World Bank 2009 (a). World Bank 2009 (a). E.g. 46 percent of the children younger than five years are undernourished; the female adult literacy is 48 percent. IEA 2007: p. 425. For data in this section see especially Human Rights Watch 2009.

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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 433 434 435 436 437 438 439

Human Rights Watch 2009: p. 249. IEA 2007: p. 427. Data in this chapter are mainly based on IEA 2007. UNEP Risoe Center 2007 (b): pp. 43-46. UNDP 2007: p. 44. IEA 2007: p. 449. IEA 2007: p. 443.

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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. 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. 441

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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. 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. 448

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5.1.3 Implementing CDM Projects in India

455

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).

> Figure 5.1: CDM Projects in India

Source: map based on data from the UNFCCC [16.12.2009] - (http://cdm.unfccc.int/Projects/MapApp/index.html)

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. 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. 455

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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 459 460 461

NCDMA 2009. See for a detailed analysis: Beck / Martinot 2004. (www.martinot.info/Beck_Martinot_AP.pdf) Ministry of Non-conventional Energy Sources, India 2001.

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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. 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. 463

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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. 467 468

PDD: http://cdm.unfccc.int/UserManagement/FileStorage/XSO665NIFTVG6BRSRS98VGT4789TVE [retrieved: 12.2.2010], p. 3. For a detailed barrier analysis see BMU / GTZ 2008 (a): pp. 36ff.

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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.

> Figure 5.2: Wilkins’ Analytical Framework Applied to India There are good natural conditions for Laws to promote RE exist, but often lack various RE sources, but a lack concrete targets. Implementation deficits and policy of political action and inconsistency between national and State legislation can be incentives to promote observed due to strong States. RE - both on the national and Some CDM projects claim to be the State pilot projects and involve training and level. education. Projects often do not lead to further action. Some technical barriers are reduced with the help of the CDM. However, technology and knowledge transfer is very rare /most wind projects Noise exposure without foreign etc. technologies.

Investment barriers are mostly minimized or eliminated by the CDM. Still there are financial capital barriers to RE, such as various costs tariff and policy change in a state dominated energy sector. cost SD benefits do not efficiency result in additional choice of location revenues.

Social freedom is guaranteed. However, ethical conflicts also challenge CDM projects. There is a lack of awareness for biomass and small hydro projects.

Source: Illustration by the author based on Wilkins 2002.

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. 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) 470

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“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 InfoNet477 functions as a source for domestic action, laws and regulations, and other information on

471 472 473 474 475 476 477

UNDP 2007: p. 41. UNDP 2007: p. 151. People’s Republic of China 2004. People’s Republic of China 2004: p. 4. United Nations Development Program (UNDP) 2007 (a): p. 97. Burck, Jan / Bals, Christoph / Rossow, Verena 2009. National Development and Reform Commission (NDRC) 2009.

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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. 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. 479

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(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 seatlegislature 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

487 488 489 490 491 492

U.S. Department of State 2009 (b). Oksenberg / Economy 1998: p. 355. For a more detailed characterisation see Hartmann, Jürgen 2006. U.S. Department of State 2009 (b). IEA 2007: p. 244. Oksenberg / Economy 1998 investigate China’s commitment to five international environmental treaties.

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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 foreign493 494 495 496 497 498 499

For more information about the implementation of policy see: Harmann, Jürgen: pp. 105 ff. For more information about corruption in China: Hartmann, Jürgen 2006: pp. 91 ff. Data in this chapter mainly from World Bank 2009 (b). Oksenberg / Economy 1998: p. 354. U.S. Department of State 2009 (b). IEA 2007: 245. Major industries are mining, iron, coal, machinery; textiles and various consumer products.

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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.”506 500 501 502 503 504 505 506

U.S. Department of State 2009 (b). Data in this chapter are mainly based on UNEP Risoe Center 2007 (b). and Human Rights Watch 2009. Human Rights Watch 2009. U.S. Department of State 2009 (b). Government of the People’s Republic of China 2004. See UNDP 2007: p. 151. UNDP 2007: p. 151.

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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 Network 514 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. 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] 508

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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 energysupply 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. 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 518

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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

> Figure 5.3: CDM Projects in China

Source: map based on data from the UNFCCC [16.12.2009] - (http://cdm.unfccc.int/Projects/MapApp/index.html)

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. 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] 526

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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. 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. 530

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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.

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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.

> Figure 5.4: Wilkins’ Analytical Framework Applied to China Good natural conditions for RE sources exist. Barriers are national and local political Laws to promote RE exist – but are often conditions and the energy not specific enough. Implementation on the local level is a further sector, but are rarely barrier. Local authorities matter despite a strong central state. raised in CDM PDDs which focus on CDM partly supports capacity building and financial pilot projects. Resistance partly occurs on barriers. the local level. Technical barriers are Investment barriers are mostly reduced with the help of the CDM. minimized or eliminated by the However, almost no new technologies capital CDM. It is identified as the key are transferred to China – costs barrier. Compared to coal, RE especially with regard cost are massively disadvantaged and to wind and efficiency financially unattractive. hydro projects. noise exposure choice of location etc. Environmentalism and opposition to the national legislation in China is rare due to restrictions under the communist regime.

Source: Illustration by the author based on Wilkins 2002.

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.

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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.

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 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). 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 cobenefits). 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] 548

549

Government of Japan 2006: Ch2-13.

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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.

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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. 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.) 553

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“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. 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 556

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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, climatefriendly 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.

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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.

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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.

> Figure 6.1 The Effectiveness of the CDM Regime 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.

overcome barriers for renewable energy projects promotion of sustainable development

effectiveness of the CDM changing the political environment

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. Source: Illustration by the author.

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.

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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

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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 564 565 566

Pearson, B. 2005: p. 251. See Nakhooda, S. 2008. TERI 2008: p. 10.

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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

> Figure 6.2: Three Dimensions of Interactions under the CDM Regime international dimension The national political framework can support CDM project implementation, but has only little effect on the effectiveness of the CDM.

Bottom-up learning under the CDM remains restricted as no direct links between the local and international level exist.

Still, voluntary action has the potential to lead to stepwise political commitments, if the CDM would not punish stronger legislation.

Still, local political conditions and authorities have a strong impact on the process of implementation.

The national government can provide a strong no direct impact on policy translation CDM framework with incentives, capacity national building and awareness raising.

dimension

local dimension

Projects on the ground show feasibility of RE technologies, but cannot be translated into stronger national legislation. no direct impact on policy translation

Source: Illustration by the author.

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, 567 568

TERI 2008, p. 4. TERI 2008: p. 7.

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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.

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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.

> Figure 6.3: Dependent Variable and Explaining Factors CDM Host Country    

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

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.

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

Source: Illustration by the author.

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. 569 570

Weiss / Jacobson 1998: p. 1. Weiss / Jacobson 1998: pp. 511 and 551.

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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. 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. 572

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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. ďƒ° 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. ďƒ° 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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HAAS, PETER M. / KEOHANE, ROBERT O. / LEVY, MARC A. 1993: Institutions for the Earth. Sources of Effective International Environmental Protection. MIT Press, Massachusetts Institute of Technology, Cambridge. HAITES, ERIK (MARGAREE CONSULTANTS INC.) / SERES, STEPHEN (CLIMATE SOLUTIONS) 2008: An Analysis of Technology Transfer in CDM Projects. In: International Emissions Trading Association (IETA) 2008: Greenhouse Gas Market 2008. Piecing Together a Comprehensive International Agreement for a Truly Global Carbon Market. Geneva. HARMELING, SVEN 2009: Global Climate Risk Index 2010. Who is Most Vulnerable? WeatherRelated Loss Events Since 1990 and How Copenhagen Needs to Respond. Germanwatch e.V. (www.germanwatch.org/klima/cri2010.pdf)

HARMELING, SVEN 2008: Global Climate Risk Index 2009. Weather-Related Loss Events and Their Impacts on Countries in 2007 and a Long-Term Comparison. Germanwatch e.V., Bonn. (www.germanwatch.org/cri)

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HARRISON, KATHRYN / SUNDSTROM, LISA MCINTOSH 2007: Introduction: The Comparative Politics of Climate Change. Global Environmental Politics, volume 7, number 4, November 2007, Massachusetts Institute of Technology. pp. 1-18. HARTMANN, JÜRGEN 2006: Politik in China. Eine Einführung. VS Verlag für Sozialwissenschaften, Wiesbaden. HASENCLEVER, ANDREAS / MAYER, PETER / RITTBERGER, VOLKER 1997: Theories of International Regimes. Cambridge University Press, Cambridge. HEDMAN, EVA-LOTTA E. / SIDEL, JOHN T. 2000: Philippine Politics and Society in the Twentieth Century. Colonial Legacies, Post-colonial Trajectories. Routledge, New York. HERRING, RONALD J. / BHARUCHA, ERACH 1998: India. Embedded Capacities. In: Weiss, Edith Brown / Jacobson, Harold K. (editors) 1998: Engaging Countries. Strengthening Compliance with International Environmental Accords. MIT Press, Cambridge, Massachusetts, pp.395-436. HOEKMAN, BERNARD / JAVORCIK, BEATA SMARZYNSKA (EDITORS) 2006: Global Integration and Technology Transfer. Palgrave Macmillan, World Bank, New York. HOOGHE, L. / MARKS, G. 2003: Unravelling the Central State, but How? Types of Multi-level Governance. American Political Science Review, volume 97, number 2, pp. 233-43. HUMAN RIGHTS WATCH 2009: World Report 2009. Events of 2008. (www.hrw.org/sites/default/files/reports/wr2009_web.pdf)

INSTITUTE FOR GLOBAL ENVIRONMENTAL STRATEGIES (IGES) 2005 (a): CDM Country Guide for India. Institute for Global Environmental Strategies (IGES) / Ministry of the Environment, Japan / Winrock International India. INSTITUTE FOR GLOBAL ENVIRONMENTAL STRATEGIES (IGES) 2005 (b): CDM Country Guide for China. Institute for Global Environmental Strategies (IGES) / Ministry of the Environment, Japan / Chinese Renewable Energy Industries Association (CREIA). INSTITUTE FOR GLOBAL ENVIRONMENTAL STRATEGIES (IGES) 2006: Clean Development Mechanism. CDM Country Guide for the Philippines. Institute for Global Environmental Strategies, Ministry of the Environment Japan, Preferred Energy Inc., Department of Environment and Natural Resources of the Philippines. INSTITUTE FOR GLOBAL ENVIRONMENTAL STRATEGIES (IGES) 2008: CDM in Charts Version 6.1 November 2008. Updated up to the results of the EB 43. Ministry of the Environment Japan. (http://enviroscope.iges.or.jp/modules/envirolib/upload/970/attach/charts6.1.pdf )

INSTITUTE FOR GLOBAL ENVIRONMENTAL STRATEGIES (IGES) 2009 (a): CDM Country Fact Sheet: Philippines. IGES Market Mechanism Project / Climate Change Area, Keisuke Iyadomi, November 2009. (http://enviroscope.iges.or.jp/modules/envirolib/upload/984/attach/philippines_final.pdf) INSTITUTE FOR GLOBAL ENVIRONMENTAL STRATEGIES (IGES) 2009 (b): CDM Country Fact Sheet: India. IGES Market Mechanism Project / Climate Change Area, Keisuke Iyadomi, November 2009. (http://enviroscope.iges.or.jp/modules/envirolib/upload/984/attach/india_fianl.pdf)

INSTITUTE FOR GLOBAL ENVIRONMENTAL STRATEGIES (IGES) 2009 (c): CDM Country Fact Sheet: China. IGES Market Mechanism Project / Climate Change Area, Keisuke Iyadomi, November 2009. (www.enviroscope.iges.or.jp/modules/envirolib/upload/984/attach/china_final.pdf)

INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE (IPCC) 2000: Methodological and Technological Issues in Technology Transfer. B. Metz, O.R. Davidson, J-W. Martens, S.N.M. van Rooijen and L Van Wie McGrory (editors), Cambridge University Press, Cambridge, United Kingdom. (www.ipcc.ch/ipccreports/sres/tectran/index.htm)

INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE (IPCC) 2007: Climate Change 2007. Synthesis Report. (www.ipcc.ch/pdf/assessment-report/ar4/syr/ar4_syr.pdf) INTERNATIONAL EMISSIONS TRADING ASSOCIATION (IETA) 2008: State of the CDM 2008. Facilitating a Smooth Transition into a Mature Environmental Financing Mechanism. (www.ieta.org/ieta/www/pages/getfile.php?docID=3111)

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INTERNATIONAL ENERGY AGENCY (IEA) 2000: World Energy Outlook 2000. (www.iea.org/textbase/nppdf/free/2000/weo2000.pdf)

INTERNATIONAL ENERGY AGENCY (IEA) 2003: Renewables for Power Generation. Status and Prospects. OECD, Paris. (www.iea.org/textbase/nppdf/free/2000/renewpower_2003.pdf) INTERNATIONAL ENERGY AGENCY (IEA) 2007: World Energy Outlook 2007. China and India Insights. (www.iea.org/textbase/nppdf/free/2007/weo_2007.pdf)

INTERNATIONAL ENERGY AGENCY (IEA) 2008: World Energy Outlook 2008. (Chapter 7: Renewable Energy Outlook), pp. 159-178, OECD, Paris. INTERNATIONAL ENERGY AGENCY (IEA) 2009: Global Renewable Energy Database. (www.iea.org/textbase/pm/?mode=re)

IOB EVALUATIONS 2008: Clean and Sustainable? An Evaluation of the Contribution of the Clean Development Mechanism to Sustainable Development in Host Countries. IOB Evaluations, number 310, April 2008, The Hague. JAKOBSEN, SUSANNE 1999: International Relations and Global Environmental Change. Review of the Burgeoning Literature on the Environment. In: Cooperation and Conflict. Nordic Journal of International Studies. Volume 32, Number 2, June 1999, pp. 205-236. JANN, WERNER / WEGRICH, KAI 2003: Phasenmodelle und Politikprozesse: Der Policy Cycle. In: Schubert, Klaus/Bandelow, Nils C. (Hg.), 2003: Lehrbuch der Politikfeldanalyse, München. JAPAN INTERNATIONAL COOPERATION AGENCY (JICA) 2002: Country Profile on Environment. Philippines. (www.jica.go.jp/english/global/env/profiles/pdf/03.pdf) JOTZO, FRANK / MICHAELOWA, AXEL 2001: Estimating the CDM market under the Bonn Agreement. Hamburg Institute of International Economics Discussion Paper, Hamburg. KEOHANE, ROBERT O. 1984: After Hegemony: Cooperation and Discord in the World Political Economy. Princeton University Press, Princeton. KEOHANE, ROBERT O. 1989: International Institutions and State Power. Essays in International Relations Theory. Boulder, Colorado. KEOHANE, ROBERT O. 2002: Power and Governance in a Partially Globalized World. London, New York. KEOHANE, ROBERT O. / MILNER, HELEN V. 1996: Internationalization and Domestic Politics. Cambridge University Press, Cambridge and New York. KEOHANE, ROBERT O. / NYE, JOSEPH S. 1977: Power and Interdependence. World Politics in Transition. Little, Brown, Boston. KRELL, GERT 2003: Weltbilder und Weltordnung: Einführung in die Theorie der Internationalen Beziehungen. Nomos Verlag, Baden-Baden. KRELL, GERT 2007: Theorien in den Internationalen Beziehungen. In: Knapp, Manfred und Krell, Gert 2007: Einführung in die internationale Politik. R. Oldenbourg Verlag, München, Wien, pp. 57ff. KREUZER, PETER 2007: Formen und Dynamiken politischer Gewalt in den Philippinen. Hessische Stiftung Friedens- und Konfliktforschung, Report 8/2007, Frankfurt/Main. KREY, MATTHIAS 2004: Transaction Costs of CDM Projects in India. An Empirical Survey. Hamburg Institute of International Economics Report (238), Hamburg. LAKO, PAUL 2008: Mapping Climate Mitigation Technologies/Goods Within the Energy Supply Sector. Study on State of the Art of Renewables for ICTSD. Energy Research Center of the Netherlands, November 2008. (www.ecn.nl/publications/PdfFetch.aspx?nr=ECN-E--08-072) LANGE, ANDREAS 2007: Elitenherrschaft und der Fluch der Ressourcen: Lokale Entwicklungsblockaden in den Philippinen. In: Südostasien Aktuell. volume 6, 2007, German Institute of Global Area studies. Institute of Asian studies. pp. 6-27. 120

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LAWRENCE, KAREN 2002: Negotiated Biodiversity Conservation for Local Social Change: A Case Study of Northern Palawan, Philippines. PhD thesis, Department of Geography, King’s College London. LÖVBRAND, EVA / RINDEFJÄLL, TERESIA / NORDQVIST, JOAKIM 2009: Closing the Legitimacy Gap in Global Environmental Governance? Lessons from the Emerging CDM Market. Global Environmental Politics, volume 9, number 2, May 2009, Massachusetts Institute of Technology. pp. 74-100. LOEWEN, HOWARD 2005: Zivilgesellschaft und Demokratie auf den Philippinen. In: Südostasien Aktuell, volume 2, German Institute of Global Area studies. Institute of Asian studies, Hamburg, pp. 15-25. LOEWEN, HOWARD 2007: Die Wahlen in den Philippinen – Kontinuität und Wandel. In: Südostasien Aktuell, volume 4, German Institute of Global Area studies. Institute of Asian studies, Hamburg, pp. 67-75. LUARD, EVAN (EDITOR) 1992: Basic Texts in International Relations. Macmillan, Basingstoke and London. LUTERBACHER, URS / SPRINZ, DETLEF F. 2001: International Relations and Global Climate Change. MIT Press, Cambridge, Massachusetts. MICHAELOWA, AXEL 2001: Mitigation versus Adaptation: the Political Economy of Competition between Climate Policy Strategies and the Consequences for Developing Countries. Institute of International Economics Discussion Paper, Hamburg. MICHAELOWA, AXEL / JUSEN, ASUKA / KRAUSE, KARSTEN / GRIMM, BERNHARD / KOCH, TOBIAS 2000: CDM Projects in China’s Energy Supply and Demand Sector. Opportunities and Barriers. Institute of International Economics Discussion Paper (90), Hamburg. MILLER, CLARK A. / EDWARDS, PAUL N. (EDITORS) 2001: Changing the Atmosphere. Expert Knowledge and Environmental Governance. Cambridge, London: MIT Press, Cambridge. MILLER, MARIAN A. L. 1992: Addressing Resource Management Concerns: The Third World in Global Environmental Politics. In Bauzon, Kenneth (editor) 1992: Development and Democratization in the Third World: Myths, Hopes and Realities. Taylor and Francis, New York, pp. 169–181. MILLER, MARIAN A. L. 1995: The Third World in Global Environmental Politics. Open University Press, Buckingham. MILNER, HELEN V. 1997: Interests, Institutions and Information. Domestic Politics and International Relations. Princeton University Press, Princeton. MINISTRY OF NON-CONVENTIONAL ENERGY SOURCES, INDIA 2001: Barriers to Renewable Energy Development in India. (www.indiasolar.com/barriers.htm) MINISTRY OF THE ENVIRONMENT JAPAN 2009: CDM / JI Manual 2008 for Project Developers and Policy Makers. (http://gec.jp/gec/en/Activities/cdm/cdmjimanual2009e.pdf) MUKHEIBIR, P / ZIERVOGEL, G. 2007: Developing a Municipal Adaptation Plan (MAP) for Climate Change: the City of Cape Town. Environment & Urbanisation, volume 19, number 1, April 2007, pp. 143-158. MÜLLER, HARALD 1993: Die Chance der Kooperation. Regime in den internationalen Beziehungen. Wissenschaftliche Buchgesellschaft, Darmstadt. MÜLLER-PELZER, FELICIA 2004: The Clean Development Mechanism. A Comparative Analysis of Chosen Methodologies for Methane Recovery and Electricity Generation. Hamburg Institute of International Economics Report, Hamburg. NAJAM, ADIL 1995: Learning from the Literature on Policy Implementation. A Synthesis Perspective. Working Paper (WP-95-61), International Institute for Applied Systems Analysis, Laxenburg, Austria.

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NAJAM, ADIL 2005: Why Environmental Politics Look Different From the South. In: Dauvergne, Peter (editor) 2005: Handbook of Global Environmental Politics. Edward Elgar, Cheltenham, Northampton. pp. 111-126. NATIONAL CLEAN DEVELOPMENT AGENCY (NCDMA) 2009: Capacity Building Initiatives. GTZ and MoEF in CDM. (www.cdmindia.nic.in/capacity_gtz.htm) NATIONAL DEVELOPMENT AND REFORM COMMISSION (NDRC) 2009: China Climate Change Info-Net. (www.ccchina.gov.cn/en/)

NATIONAL ECONOMIC DEVELOPMENT AUTHORITY OF THE PHILIPPINES (NEDA) 2004: Medium-Term Philippine Development Plan. 2004–2010. (www.neda.gov.ph/econreports) NOHLEN, DIETER / SCHULTZE, RAINER-OLAF 2004: Lexikon der Politikwissenschaft. Band 2, N-Z. Theorie, Methoden, Begriffe. 2nd edition, Verlag C. H. Beck, München. OKEREKE, CHUKWUMERIJE / BULKELEY, HARRIET / SCHROEDER, HEIKE 2009: Conceptualizing Climate Governance. Beyond the International Regime. Global Environmental Politics volume 9, issue 1, February 2009. OKSENBERG, MICHEL / ECONOMY, ELIZABETH 1998: China. Implementation under Economic Growth and Market Reform. In: Weiss, Edith Brown / Jacobson, Harold K. 1998: Engaging Countries. Strengthening Compliance with International Environmental Accords. MIT Press, Cambridge, Massachusetts, pp. 353-394. OLSEN, KAREN HOLM 2007: The Clean Development Mechanism's Contribution to Sustainable Development. A Review of the Literature. UNEP Risø Centre, Roskilde, Denmark. (www.cd4cdm.org/Publications/CDM&SustainDevelop_literature.pdf)

OPPERMANN, KLAUS 2006: CDM programs and the promotion of renewable energies in development countries. UNFCCC presentation, SBSTA 24 side event, May 22 2006. PANOPIO, ISABEL ET AL. 2004: Sociology – Focus on the Philippines. Quezon City. PEARSON, BEN 2005: Market failure: Why the Clean Development Mechanism Won't Promote Clean Development. Journal of Cleaner Production 15: pp. 247-252. PEREZ, ROSA ET AL. 1999: Climate Change Impacts and Responses in the Philippines Coastal Sector. Climate Research, volume 12, pp. 97–107. (www.int-res.com/articles/cr/12/c012p097.pdf) PUTNAM, R. D. 1998: Diplomacy and Domestic Politics. The Logic of Two-Level Games. International Organizations, volume 42, number 3, pp. 427-460. REDDY, DR. B. SUDHAKAR 2001: Barriers to the Diffusion of Renewable Energy Technologies – A Case Study of the State of Maharashtra, India. UNEP Collaborating Centre on Energy and Environment. Risoe National Laboratory, Denmark. (www.uneprisoe.org/RETs/MaharashtraStudy.pdf) REESE, NIKLAS 2007 (a): Soziale Ungleichheit und Staatliche Armutsbekämpfung. In: Reese, N. / Werning, R. (editors) 2007: Handbuch Philippinen. Gesellschaft, Politik, Wirtschaft, Kultur. Horlemann, Bad Honnef, pp. 54-63. REESE, NIKLAS 2007 (b): Stadt – Land – Fluss. Zum Zustand der Umwelt. In: Reese, N. / Werning, R. (editors) 2007: Handbuch Philippinen. Gesellschaft, Politik, Wirtschaft, Kultur. Horlemann, Bad Honnef, pp. 188-195. REESE, NIKLAS 2007 (c): Potentaten und widerspenstige Untertanen. Das politische System in Theorie und Praxis. In: Reese, N. / Werning, R. (editors) 2007: Handbuch Philippinen. Gesellschaft, Politik, Wirtschaft, Kultur. Horlemann, Bad Honnef, pp. 221-236. REINICKE, WOLFGANG H. 1998: Global Public Policy. Governing without Government. Brookings Institute, Washington. RENEWABLE ENERGY POLICY NETWORK FOR THE 21ST CENTURY (REN 21) 2008: Renewables 2007. Global Status Report. (www.ren21.net/globalstatusreport/default.asp)

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RENEWABLE ENERGY POLICY NETWORK FOR THE 21ST CENTURY (REN 21) 2009 (a): Background Paper. Chinese Renewable Status Report. October 2009. (www.ren21.net/pdf/Background_Paper_Chinese_Renewables_Status_Report_2009.pdf)

RENEWABLE ENERGY POLICY NETWORK FOR THE 21ST CENTURY (REN 21) 2009 (b): Recommendations for Improving the Effectiveness of Renewable Energy Policies in China. (www.ren21.net/pdf/Recommendations_for_RE_Policies_in_China.pdf)

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SHARMA, DEEPAK / MADAMBA, SONIA E. / CHAN, ROSARIO L. 2003: Electricity industry reforms in the Philippines. Elsevier Science Ltd. 2003. SILAYAN, ALAN 2005: Equitable Distribution of CDM Projects among Developing Countries. Hamburg Institute of International Economics Report, Hamburg. STERK, WOLFGANG 2008: From Clean Development Mechanism to Sectoral Crediting Approaches – Way Forward or Wrong Turn? JIKO Policy Paper 1/2008, Wuppertal Institute for Climate, Environment and Energy, May 2008. (www.jiko-bmu.de/files/inc/application/pdf/policy_paper-cdm-post2012.pdf)

TATA ENERGY RESEARCH INSTITUTE (TERI) 2003: Enabling Environments for Technology Transfer. Draft Technical Paper for a UNFCCC workshop in Ghent, 9-10 April 2003. TATA ENERGY RESEARCH INSTITUTE (TERI) 2008: Strengthening the CDM: A bird’s eye view. New Delhi. TENG, FEI / GU, ALUN 2007: Climate Change: National and Local Policy Opportunities in China. Fondazione Eni Enrico Mattei, Global Climate Change Institute, Tsinghua University, China. TUAZON, ANNA MAE 2008: Clean Development Mechanism: New Challenges for the Philippines. Asian Institute of Management Policy Center. June 2008. U.S. DEPARTMENT OF STATE 2009 (a): Background Note. India. November 2009, Bureau of South and Central Asian Affairs (www.state.gov/r/pa/ei/bgn/3454.htm) U.S. DEPARTMENT OF STATE 2009 (b): Background Note. China. October 2009, Bureau of East Asian and Pacific Affairs. (www.state.gov/r/pa/ei/bgn/18902.htm) UMWELTBUNDESAMT (EDITOR) 2007: Promoting Renewable Energy Technologies in Developing Countries through the Clean Development Mechanism. Science Centre North RhineWestphalia, Wuppertal Institute for Climate, Environment and Energy, Environmental Research of the BMU, Research Report 203 41 141, UBA-FB 001078, 15/07, Wuppertal. UNDERDAL, ARILD 1992: The Concept of Regime “Effectiveness”. In: Cooperation and Conflict. Nordic Journal of International Studies. volume 27, number 3, September 1992, pp. 227240. UNDERDAL, ARILD (editor) 1998: The Politics of International Environmental Management. Kluwer Academic Publishers, Dordrecht, Boston, London. UNDERDAL, ARILD / HANF, KENNETH (EDITORS) 2000: International Environmental Agreements and Domestic Politics. The Case of Acid Rain. Ashgate Publishing Limited, England. UNITED NATIONS 1992: Plan of Implementation of the World Summit on Sustainable Development. (www.un.org/esa/sustdev/documents/WSSD_POI_PD/English/WSSD_PlanImpl.pdf)

UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT (UNCTAD) 2000 [UNCTAD/GDS/GFSB/Misc.7]: The Clean Development Mechanism. Building International Public-Private Partnerships under the Kyoto Protocol. Technical, Financial and Institutional Issues. United Nations, New York and Geneva. UNITED NATIONS DEVELOPMENT PROGRAM (UNDP) 2004: CDM Sustainable Development Impacts. Risoe National Laboratory, Roskilde, Denmark. UNITED NATIONS DEVELOPMENT PROGRAM (UNDP) 2005: Register of International Treaties and other Agreements in the Field of the Environment. Nairobi (www.unep.org/law/PDF/register_Int_treaties_contents.pdf) UNITED NATIONS DEVELOPMENT PROGRAM (UNDP) 2007 (a): Human Development Report 2007/2008. Fighting Climate Change: Human Solidarity in a Divided World. United Nations Development Programme, New York. UNITED NATIONS DEVELOPMENT PROGRAM (UNDP) 2007 (b): 2007/2008 Human Development Report. Country Fact Sheet Philippines. (http://hdrstats.undp.org/countries/country_fact_sheets/cty_fs_PHL.html)

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UNITED NATIONS DEVELOPMENT PROGRAM (UNDP) 2009: Human Development Report 2009. Overcoming Barriers: Human Mobility and Development. (http://hdr.undp.org/en/media/HDR_2009_EN_Complete.pdf)

UNITED NATIONS ENVIRONMENTAL PROGRAM (UNEP) 1992: Rio Declaration on Environment and Development. (www.unep.org/Documents.Multilingual/Default.asp?DocumentID=78&ArticleID=1163) UNITED NATIONS ENVIRONMENTAL PROGRAM (UNEP) RISOE CENTER 2007: Balancing Development, Energy and Climate Priorities in China. Current Status and the Way Ahead. September 2007. (www.developmentfirst.org/Publications/DevelopEnergyClimate_China.pdf) UNITED NATIONS ENVIRONMENTAL PROGRAM (UNEP) RISOE CENTER 2007 (b): Balancing Energy, Development and Climate Priorities in India. Current Trends and Future Projections. September 2007. (www.developmentfirst.org/Publications/DevelopEnergyClimate_India.pdf) UNITED NATIONS ENVIRONMENTAL PROGRAM (UNEP) RISOE CENTER 2010: UNEP Risoe CDM/JI Pipeline Analysis and Database. (http://cdmpipeline.org/overview.htm) UNITED NATIONS FRAMEWORK CONVENTION ON CLIMATE CHANGE (UNFCCC) 1997: Kyoto Protocol to the United Nations Framework Convention on Climate Change. (http://unfccc.int/resource/docs/convkp/kpeng.pdf)

UNITED NATIONS FRAMEWORK CONVENTION ON CLIMATE CHANGE (UNFCCC) 2006 (a): Technologies for Adaptation to Climate Change. United Nations Climate Change Secretariat, Bonn. (http://unfccc.int/resource/docs/publications/tech_for_adaptation_06.pdf)

UNITED NATIONS FRAMEWORK CONVENTION ON CLIMATE CHANGE (UNFCCC) 2006 (b): Guidelines for Completing the Project Design Document (CDM-PDD), and the Proposed New Baseline and Monitoring Methodologies (CDM-NM). version 05, CDM-Executive Board, Bonn, May 19th 2006. (http://cdm.unfccc.int/Reference/Documents/copy_of_Guidel_Pdd/English/Guidelines_CDMPDD_NM.pdf ) UNITED NATIONS FRAMEWORK CONVENTION ON CLIMATE CHANGE (UNFCCC) 2008 (a): Climate Change: Impacts, Vulnerabilities and Adaptation in Developing Countries. United Nations Climate Change Secretariat, Bonn.

UNITED NATIONS FRAMEWORK CONVENTION ON CLIMATE CHANGE (UNFCCC) DOCUMENTS: 

1996 [FCCC/SBSTA/1996/8]: Report of the Subsidiary Body for Scientific and Technological Advice on the Work of its Second Session, held at Geneva from 27 February to 4 March 1996. (http://unfccc.int/resource/docs/1996/sbsta/08.pdf)

2002 [FCCC/CP/2001/13/Add.1]: Report of the Conference of the Parties on its Seventh Session, Held at Marrakesh from 29 October to 10 November 2001. (http://unfccc.int/resource/docs/cop7/13a01.pdf)

2005 [FCCC/KP/CMP/2005/8/Add.1]: Report of the Conference of the Parties to the Kyoto Protocol on it First Session, Held in Montreal from 28 November to 10 December 2005. ßAddendum. (http://unfccc.int/resource/docs/2005/cmp1/eng/08a01.pdf )

2008 [FCCC/KP/CMP/2008/INF.2]: Compilation and Analysis of Available Information on Ways and Means to Enhance Equitable Regional and Subregional Distribution of Projects Under the Clean Development Mechanism. Note by the secretariat. (http://unfccc.int/resource/docs/2008/cmp4/eng/inf02.pdf)

2008 [FCCC/KP/CMP/2008/4]: Annual Report of the Executive Board of the Clean Development Mechanism to the Conference of the Parties Serving as the Meeting of the Parties to the Kyoto Protocol. (http://unfccc.int/resource/docs/2008/cmp4/eng/04.pdf)

2008 [FCCC/KP/CMP/2008/MISC.3]: Views from Parties on ways and means to enhance equitable regional and sub-regional distribution of projects under the clean development mechanism. Submissions from Parties. (http://unfccc.int/resource/docs/2008/cmp4/eng/misc03.pdf)

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2008 [FCCC/KP/CMP/2008/INF.3]: Compilation and Analysis of Available Information on the Scope, Effectiveness and Functioning of the Flexibility Mechanisms under the Kyoto Protocol. Note by the secretariat. (http://unfccc.int/resource/docs/2008/cmp4/eng/inf03.pdf)

2009 [FCCC/KP/CMP/2009/16]: Further Guidance Relating to the Clean Development Mechanism. (http://unfccc.int/files/meetings/cop_15/application/pdf/cmp5_cdm_auv.pdf)

VANDEVEER, STACY D. 2005: Effectiveness, Capacity Development and International Environmental Cooperation. In: Dauvergne, Peter (editor) 2005: Handbook of Global Environmental Politics. Edward Elgar, Cheltenham, Northampton. pp. 95-110. VICTOR, DAVID G. / RAUSTIALA, KAL / SKOLNIKOFF, EUGENE B. (EDITORS) 1998: The Implementation and Effectiveness of International Environmental Commitments. Theory and Practice. International Institute for Applied System Analysis, Laxenburg, Austria. VIOTTI, PAUL R. / KAUPPI, MARK V. 1998: International Relations Theory. Realism, Pluralism, Globalism. Needham Heights, Massachusetts. VOGEL, DAVID / KESSLER, TIMOTHY 1998: How Compliance Happens and Doesn’t Happen Domestically. In: Weiss, Edith Brown / Jacobson, Harold K. 1998: Engaging Countries. Strengthening Compliance with International Environmental Accords. MIT Press, Cambridge, Massachusetts, pp. 19-38. WAGNER, CHRISTIAN 2006: Das Politische System Indiens. Eine Einführung. VS Verlag für Sozialwissenschaften, Wiesbaden. WAKEFIELD, ROBERT I. 2007: Globalisation, Glocalisation, and Corporate Reputation: What Does it all Mean for the Multinational Entity? Brigham Young University. (www.bledcom.com/uploads/papers/Wakefield.pdf) WEISS, EDITH BROWN / JACOBSON, HAROLD K. 1998: Engaging Countries. Strengthening Compliance with International Environmental Accords. MIT Press, Cambridge, Massachusetts. WETTESTAD, JØRGEN 2000: Designing Effective Environmental Regimes. The Key Conditions. Edward Elgar Publishing Limited, Cheltenham, United Kingdom. WILLIAMS, MARC 2005: The Third World and Global Environmental Negotiations. Interests, Institutions and Ideas. Global Environmental Politics 5:3, August 2005, Massachusetts Institute of Technology. WILKINS, GILL 2002: Technology Transfer for Renewable Energy. Overcoming Barriers in Developing Countries. Earthscan, London. WORLD BANK 2006: Clean Energy and Development: Towards an Investment Framework. April 2006. WORLD BANK 2007(a): Project Appraisal Document to the Republic of the Philippines for a National Program Support to Environment and Natural Resources Management Project. May 25th 2007, Rural Development, Natural Resources and Environment Sector Unit, Sustainable Development Department, East Asia and Pacific Region. (wwwwds.worldbank.org/external/default/main?pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=641875 10&searchMenuPK=64187283&siteName=WDS&entityID=000310607_20070608105357)

WORLD BANK 2007(b): Philippines. Country Assistance Strategy Progress Report. June 21th 2007, Rural Development, Natural Resources and Environment Sector Unit, Sustainable Development Department, East Asia and Pacific Region. (www.worldbank.org.ph/external/default/main?pagePK=51187349&piPK=51189435&theSitePK=332982&menuPK=64 187510&searchMenuPK=333011&theSitePK=332982&entityID=000020439_20070713111712&searchMenuPK=333011&t heSitePK=332982)

WORLD BANK 2008: Philippines. Country Brief. (www.worldbank.org.ph/WBSITE/EXTERNAL/COUNTRIES/EASTASIAPACIFICEXT/PHILIPPINESEXTN/0,,contentMDK:20 203978~isCURL:Y~menuPK:332990~pagePK:141137~piPK:141127~theSitePK:332982,00.html)

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WORLD BANK 2009 (a): India Country Overview 2009. (www.worldbank.org.in/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/INDIAEXTN/0,,contentMDK:20195738~page PK:141137~piPK:141127~theSitePK:295584,00.html)

WORLD BANK 2009 (b): World Bank Country Brief China. (http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/EASTASIAPACIFICEXT/CHINAEXTN/0,,menuPK:318960~p agePK:141132~piPK:141107~theSitePK:318950,00.html)

WORLD BANK HAZARD MANAGEMENT UNIT 2006: Natural Disaster Hotspots. Case Studies. Disaster Risk Management Series No. 6, Washington D.C. WORLD COMMISSION ON ENVIRONMENT AND DEVELOPMENT (WCED) 1987: Our Common Future. Brundtland Report, Oxford University Press and United Nations, Oxford and New York. WORLD WIND ENERGY ASSOCIATION 2009: World Wind Energy Report 2008. WORRELL, E., VAN BERKEL, R., FENGQI, Z., MENKE, C., SCHAEFFER, R., O. WILLIAMS, R. 2001: Technology Transfer of Energy Efficient Technologies in Industry. A Review of Trends and Policy Issues. In: Energy Policy 29, pp. 29–43. WOYKE, WICHARD 2000: Theorien Internationaler Beziehungen. / Theorien internationaler Kooperation und Verflechtung. In: Woyke, Wichard 2000: Handwörterbuch Internationale Politik. Leske + Budrich, Opladen. WURFEL, DAVID 1991: Filipino Politics. Development and Decay. Politics & International Relations of Southeast Asia, Cornell University Press, USA. YOUNG, ORAN R. 1989: International Cooperation. Building Regimes for Natural Resources and the Environment. Cornell University Press, Ithaca and London. YOUNG, ORAN R. 1999: The Effectiveness of International Environmental Regimes. Causal Connections and Behavioral Mechanisms. MIT Press, Cambridge, Massachusetts. ZABEL, DIETER 2007: Einmischen aus Überzeugung. Gesellschaftliches Engagement und politischer Einfluss der katholischen Kirche. In: Reese, N./ Werning, R. (editors) 2007: Handbuch Philippinen. Gesellschaft, Politik, Wirtschaft, Kultur. Horlemann, Bad Honnef, pp. 325-329. ZÜRN, MICHAEL 1998: Regieren jenseits des Nationalstaats. Globalisierung und Denationalisierung als Chance. Frankfurt am Main, Suhrkamp Verlag.

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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 (jorex.camba@philbio.com.ph) Philippine Bio-Sciences Company Inc.

16.6.2009, Quezon City, PHILIPPINES Cruz, Danilo L. - Technical Manager (dannycruz3792@yahoo.com) Pangea Green Energy

23.6.2009, Makati, PHILIPPINES Kadda, Ina - Project Manager (ikadda@bronzeoakph.com) Bronzeoak Philippines, Asia Pacific Clean Energy

6.12.2008, Poznan, POLAND Koakutsu, Kazuhisa - Market Mechanism Sub Manager (cdm-info@iges.or.jp) Institute for Global Environmental Strategies (IGES) Japan

17.6.2009, Manila, PHILIPPINES Maceba, Catherine Paredes - Member National Board (cpmaceda@gmail.com) Renewable Energy Coalition / Habitat for Humanity Philippines

6.12.2008, Poznan, POLAND / 23.6.2009, Manila, PHILIPPINES Recabar, Sandee G. - CDM Services Project Assistant (donna@observatory.ph) klima Climate Change Center at the Manila Observatory

5.12.2008, Poznan, POLAND Schneider, Lambert - Research Assistant Energy and Climate (l.schneider@oeko.de) Institute for Applied Ecology, Germany

19.6.2009, Clark, PHILIPPINES Scholz, Uwe Dr., Program Advisor (uwe.scholz@gtz.de) German Technical Cooperation (GTZ)

21.6.2009, Bangui, PHILIPPINES Tiatco, Segundino A., Plant Manager (nwind@mozcom.com) Northwind Power Development Corporation

Events Attended for Research

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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

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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?

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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.

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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].

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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

586 587 588 589 590 591 592 593 594 595

Barton, J. 2007: p. 5. Barton, J. 2007: p. 5. Tata Energy Research Institute (TERI) 2003 See Hoekmann / Javorcik 2006: p. 1. See Gómez-Echeverri, L. 2000. International Energy Agency (IEA) 2008. Schneider/Holzer/Hoffmann 2008: p. 2920. See also United Nations Development Program (UNDP) 2007(b). United Nations Development Program (UNDP) 2007(b): p. 12. Intergovernmental Panel on Climate Change (IPCC) 2000: p. 3.

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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.

> Figure 9.1: Barriers to Technology Transfer

Technology Provider

Intellectual Property Right

National Institutional Framework Barriers - Commercial viability - Information - Access to Capital

Technology Recipient

Source: Illustration by the author.

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. 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. 597

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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)

Source: Illustration by the author.

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)

(b)

(c)

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; 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; 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.

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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) (b) (c) (d)

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; Modalities by which a particular funding decision may be reconsidered in light of these policies, programme priorities and eligibility criteria; 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 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.

[...]

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Annex 3 (b) - The Kyoto Protocol: Extracts and Parties’ Map > Figure 9.3: Parties to the Kyoto Protocol

Source: Illustration by the author.

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) [...].

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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.

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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 Annex I

b) Annex B to the Kyoto Protocol

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

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

Source: UNFCCC 1992, p.23.

Source: UNFCCC 1992, p.24.

(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.)

Party

(Quantified emission limitation or reduction commitment in percentage of base year or period)

Australia Austria Belgium Bulgaria a Canada Croatia a Czech Republic a Denmark Estonia a European Community Finland France Germany Greece Hungary a Iceland Ireland Italy Japan Latvia a Liechtenstein Lithuania a Luxembourg Monaco Netherlands New Zealand Norway Poland a Portugal Romania a Russian Federation* Slovakia a Slovenia a Spain Sweden Switzerland Ukraine a United Kingdom United States of America

(108) (92) (92) (92) (94) (95) (92) (92) (92) (92) (92) (92) (92) (92) (94) (110) (92) (92) (94) (92) (92) (92) (92) (92) (92) (100) (101) (94) (92) (92) (100) (92) (92) (92) (92) (92) (100) (92) (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)

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

Annex 4 - Rules and Procedures: How the Clean Development Works > Figure 9.5: Emissions Trading Systems and the Outline of the CDM cap-and-trade system

baseline-credit system

GHG emissions

GHG emissions

baseline emissions

emission reduction emissions allowance

without CDM

project emissions

with CDM

year

year

GHG emissions at a specific site in a developing country

Annex 1 country total emission cap CER

projected amount of GHG emissions from the project site

Investing Annex 1 party receives CER (Kyoto Protocol Art. 12)

Acquired CERs are added and so the emission cap increases.

Non-Annex 1 country should also benefit from project.

baseline scenario

proposed project scenario

Assistance to the project implementation. Source: Illustrations by the author based on IGES 2006.

> Figure 9.6: CDM Project Cycle and Approval Process CDM project (Large Scale / Small Scale CDM)

1

Planning a CDM project activity CDM project participants plan a project.

2

Creating a Project Design Document (PDD) Information on technical and organizational aspects

Approved methodology

New methodology

3

National approval from each Party involved Approval of voluntary participation from the DNA

PDD

EB approves methodology

4

Validation On the basis of the PDD is carried out by the DOE

Validation

5

Registration Acceptance of a validated project as a CDM project

Registration

6

7

Monitoring a CDM activity Verification and certification Issuance of CERs All necessary data on GHG emission reductions Distribution of CERs CERs are distributed among all project participants Source: Illustration by the author based on data from IGES 2008

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Annex 5 - Renewable Energy: Availability and Projects under the CDM > Figure 9.7 Availability of Renewables and Current Energy Demand

Source: BMU / Umweltbundesamt 2007: p. 7.

> Figure 9.8: Classification of CDM Projects a) number of CDM projects (%) in each category 1,0% 0,0% 4,9%

0,5%

9,7%

39,9%

renewable energy

21,3%

22,8%

b) growth of expected CERs until 2012

Hydro

B io mass Energy

Wind

B io gas

Fo ssil fuel switch

So lar

Geo thermal

Tidal

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 ………………..

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

> Figure 9.9: CDM Project Pipeline From January 1st 2010 – Overview a) CDM Projects Grouped in Types

Projects focused on in this research. b) Percentage Share of the Four Largest Categories

Source: UNEP Risoe Centre CDM Project Pipeline: http://www.cdmpipeline.org/cdm-projects-type.htm [retrieved: 28.1.2010]

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> Figure 9.10: Overcoming Barriers For RE Projects under the CDM

Source: BMU / Umweltbundesamt 2007: p. 4 (“Promoting Renewable Energy Technologies in Developing Countries through the Clean Development Mechanism”).

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

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.

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

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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].

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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: Š 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

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

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.

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> Figure 9.14 (c): Environmental Performance Index 2010 (India)

Source: Esty / Levy et al. 2010.

> Figure 9.14 (d): Comparison - Environmental Sustainability Index 2005 (India)

Source: Esty / Levy et al. 2005: p. 165.

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

> Figure 9.14 (e): Environmental Performance Index 2010 (China)

Source: Esty / Levy et al. 2010.

> Figure 9.14 (f): Comparison - Environmental Sustainability Index 2005

Source: Esty / Levy et al. 2005: p. 133.

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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 •Multiple Renewable •Regulatory Instruments Energy Sources

•Electricity

2008

Biofuels Act

•Financial •Incentives/Subsidies •Bioenergy •Regulatory Instruments

•Transport

2007

Investment Priorities Plan (IPP)

•Multiple Renewable •Financial Energy Sources •Incentives/Subsidies •Ocean •Regulatory Instruments •Solar •Wind

•Electricity

2002

Renewable Energy & Energy Efficiency Partnership (REEEP)

•Education and Outreach •Incentives/Subsidies •Policy Processes •Voluntary Agreement

•Multiple Renewable Energy Sources

•Multisectoral 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

•Ocean •Incentives/Subsidies •Solar •Regulatory Instruments •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

•Multisectoral Policy

1992

Mini-Hydro Law

•Financial

•Hydropower

•Electricity

1991

An Act to Promote the Exploration and Development of Geothermal Resources

•Financial •Geothermal •Regulatory Instruments

1978

> Figure 9.15 (b): RE Policies and Measures in India (table) Name of Policy

Type

Target

Sector

Year

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 2008 Policy

Solar Power Generation Based Incentive

•Incentives/Subsidies

•Solar Photovoltaic •Solar Thermal

•Electricity 2008

Ethanol Production

•Incentives/Subsidies •Policy Processes •Bioenergy •Regulatory Instruments

•Transport

2007

2007

India-Brazil-South Africa Declaration •Voluntary Agreement on Clean Energy

•Multiple Renewable Energy Sources

•Multisectoral Policy

Integrated Energy Policy

•Multiple Renewable Energy Sources

•Electricity 2006

150

•Policy Processes

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

Tariff Policy 2006

•Incentives/Subsidies •Multiple Renewable •Regulatory Instruments Energy Sources

•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 •Multiple Renewable Outreach Energy Sources •Regulatory Instruments

•Framework 2001 Policy

> Figure 9.15 (c): RE Policies and Measures in China (table) Name of Policy

Type

Target

Sector

Year

Guangxi Province 1 Million Mu BioFuel Forest Project

•Public Investment

•Bioenergy

•Transport

2008

Shandong Province One Million Rooftops Sunshine Plan

•Policy Processes •Regulatory Instruments

•Geothermal •Solar Photovoltaic •Solar Thermal

•Multisectoral Policy

2008

Shandong Province Village Renewable Energy Regulations

•Incentives/Subsidies •Regulatory Instruments

•Multiple Renewable Energy Sources

•Multisectoral Policy

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 2007 Policy

National Climate Change Program

•Policy Processes

•Multiple Renewable Energy Sources

•Framework 2007 Policy

Preferential Tax Policies for Renewable Energy

•Financial

•Multiple Renewable Energy Sources

•Framework 2007 Policy

Shandong Province energy fund

•Public Investment •RD & D

•Solar Thermal

•Heating and Cooling (Domestic / 2007 Industrial Process)

US China MOU on Biomass Development

•RD & D •Voluntary Agreement

•Bioenergy

•Multisectoral Policy

Eleventh Five-year Plan

•Policy Processes

•Framework 2006 Policy

Renewable Energy Development Targets

•Policy Processes

•Framework 2006 Policy

Renewable Energy Law

•Policy Processes

•Multiple Renewable Energy Sources

•Framework 2006 Policy

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

•Bioenergy

•Transport

Brightness Programme

•Policy Processes

•Hydropower •Solar Photovoltaic •Wind

•Electricity 1996

2007

2002

Source: IEA Renewable Energy Database (http://iea.org/textbase/pm/?mode=re) [retrieved: 12.2.2010]

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

Annex 11 - Energy Supply and CDM Approval in the Philippines

> Figure 9.16: Total Primary Energy Supply (TPES) in the Philippines TPES* in % 50

45,9

1990

2004

45 40

35,4

35

29,2

30

24,4 20 20,7

25 20

13,6

15 10

5,9

5

5

0

0

0

Fossil Fuels

Renewable Energy

Nuclear

Waste

Biomass,

Geothermal

Hydro,

Solar, Wind,

Gas)**

(Natural

Oil

Coal

0

Other

*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 9.17: CDM Project Approval Process in the Philippines 1

Submission of the Application Document A project design document by the project participant and the description of sustainable development benefits have to be submitted.

2

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.

3

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.

4

Registration The DENR reviews the endorsement report and finally decides weather to approve or to reject the project application. Source: Illustration by the author based on IGES 2006: p. 70f.

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

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

 o

Provide new financial resources.

Environmental dimension 

Comply with the environmental policies and standards set by the Philippines;

o

Improve the quality of the environment, e.g. air, water, soil, etc.;

Promote sustainable use of natural resources.

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.

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

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)

--

high investment risk / RE projects not attractive (3)

additional costs / lack of financial incentives (18)

--

23

--

critical supply of biomass / no reference plants (3)

uncertain performance and biogas availability / technology unknown (18)

--

22

--

absence of mandatory laws and regulations (1)

no national standards and regulations / bias against RE sources (17)

--

19

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)

technical barriers (and/or uncommon practice to use this technology)

--

only wind power project / lack of experience (1)

political barriers (and barriers due to prevailing practice)

privatization / government supports the national gas market (1)

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) --

--

(1)

--

2602

(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

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

15

--

14

18

--

7

2

--

4

Socio-economic Impacts

Further Political and Technological Impacts stimulate growth of RE in the Philippines

--

1

--

pilot project, for demonstration

--

1

--

technology transfer

--

1

--

2 1

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.

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Out of 26 energy industries related projects in the Philippines (December 2009), 25 dealt with renewable energy sources.

solar energy (0 projects) wind power (1 project) hydropower (1 project) biomass(3 projects) biogas (19 projects) geothermal (1 project)

CDM Host country: Republic of the Philippines

(25 projects) Projects have been visited by the author in 2009. Registered

10 Sep 06

Registered 06 Jun 08 Registered

Title

Annex 1 Parties Canada, Netherlands Finland, France, Sweden, Germany, Great Britain, Japan, Norway

NorthWind Bangui Bay Project

Title

Annex 1 Parties

Hedcor Sibulan 42.5 MW Hydroelectric Power Project Title

Methodology *

ACM0002 ver. 6

Methodology * ACM0002 ver. 6

Annex 1 Parties

Methodology *

Reductions **

56788

Reductions ** 95174 Reductions **

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

Registered

Title

Annex 1 Parties

31 Jan 07

Paramount Integrated Corporation Methane Recovery and Electricity Generation

Methodology *

18529 Reductions **

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)

Great Britain

AMS-I.D. ver. 12 AMS-III.D. ver. 13

2403

15 Jun 09

ANAEROBIC DIGESTION SWINE WASTEWATER TREATMENT WITH ON-SITE POWER PROJECT (ADSW RP2003)

Great Britain

AMS-I.D. ver. 12 AMS-III.D. ver. 13

8063

15 Jun 09

ANAEROBIC DIGESTION SWINE WASTEWATER TREATMENT WITH ON-SITE POWER PROJECT (ADSW RP2004)

Great Britain

AMS-I.D. ver. 12 AMS-III.D. ver. 13

4395

15 Jun 09

ANAEROBIC DIGESTION SWINE WASTEWATER TREATMENT WITH ON-SITE POWER PROJECT (ADSW) RP2006

Great Britain

AMS-I.D. ver. 12 AMS-III.D. ver. 13

2773

15 Jun 09

Anaerobic Digestion Swine Wastewater Treatment With OnSite Power Project (ADSW RP1002)

Great Britain

AMS-I.D. ver. 12 AMS-III.D. ver. 13

6679

17 Jun 09

ANAEROBIC DIGESTION SWINE WASTEWATER TREATMENT WITH ON-SITE POWER PROJECT

Great Britain

AMS-I.D. ver. 12 AMS-III.D. ver. 13

2679

17 Jun 09

Anaerobic Digestion Swine Wastewater Treatment With OnSite Power Project (ADSW RP1003)

Great Britain

AMS-I.D. ver. 12 AMS-III.D. ver. 13

1802

20 Jun 09

Anaerobic Digestion Swine Wastewater Treatment With OnSite Power Project (ADSW RP2008)

Great Britain

AMS-I.D. ver. 12 AMS-III.D. ver. 13

1415

20 Jun 09

Anaerobic Digestion Swine Wastewater Treatment With OnSite Power Project (ADSW RP1005)

Great Britain

AMS-I.D. ver. 12 AMS-III.D. ver. 13

6779

25 Jun 09

Anaerobic Digestion Swine Wastewater Treatment With OnSite Power Project (ADSW RP1007)

Great Britain

AMS-I.D. ver. 12 AMS-III.D. ver. 13

8144

29 Jun 09

Anaerobic Digestion Swine Wastewater Treatment With OnSite Power Project (ADSW RP1004)

Great Britain

AMS-I.D. ver. 12 AMS-III.D. ver. 13

12000

29 Jun 09

Anaerobic Digestion Swine Wastewater Treatment With OnSite Power Project (ADSW RP1006)

Great Britain

AMS-I.D. ver. 12 AMS-III.D. ver. 13

6442

29 Jun 09

Anaerobic Digestion Swine Wastewater Treatment With OnSite Power Project (ADSW RP1008)

Great Britain

AMS-I.D. ver. 12 AMS-III.D. ver. 13

2531

04 Sep 09

Anaerobic Digestion Swine Wastewater Treatment With OnSite Power Project (ADSW RP2007)

Great Britain

AMS-I.D. ver. 12 AMS-III.D. ver. 13

4003

Registered 10 Dec 06

Title 20 MW Nasulo Geothermal Project

Annex 1 Parties Netherlands

Methodology * ACM0002 ver. 6

Reductions ** 74975

* AM - Large scale, ACM - Consolidated Methodologies, AMS - Small scale ** Estimated emission reductions in metric tonnes of CO2 equivalent per annum

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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.

th

© Jens Marquardt (June 16th 2009)

© Jens Marquardt (June 16 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)

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

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.

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

© 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

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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

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

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; biodiversity 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)

geothermal (0)

all (50)

1) Barriers Identified by the Project Participants in the Barrier Analysis investment barriers (lack of financial incentives without the CDM)

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

technical barriers (and/or uncommon practice to use this technology)

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

--

problems with transmission and grid authorities

uncertainty about the availability of water /

imbalances in the grid might lead to tripping of the

--

--

15

political barriers (and barriers due to prevailing practice) social barriers (lack of awareness and local support) other barriers

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

(3)

no barrier analysis (according to PDD)

geology risks (11)

plant (1)

Investment analysis alone proves financial barriers, but no detailed barrier analysis. (Additionality Step 3 missing in CDM projects’ PDDs) --

--

(3)

(1)

4603

--

--

2) Contribution to Sustainable Development According to the PDD 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”) improve livelihoods of people esp. in rural areas (quality of live / energy security)

2

11

14

7

5

--

39

create local employment and improve economy

1

14

18

11

2

--

46

empower human and institutional capacity / education / training

2

1

2

1

2

--

8

--

--

4 13 none

Further Political and Technological Impacts (“Technological Well Being”) help to stimulate growth of RE in India

--

pilot project,demonstration

--

4

3

2

4

--

technology transfer

--

--

--

--

--

--

2

Out of 379 energy industries related projects in India (December 2009), 50 have been selected. CDM Host country: Republic of India

--

2

solar energy (2 projects) 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.

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Registered

Title

22 Aug 06

Solar steam for cooking and other applications

10 Aug 09

Rural Education for Development Society (REDS) CDM Photovoltaic Lighting Project

Registered

Title

Annex 1 Parties Germany

Annex 1 Parties

Methodology* AMS-I.C. ver. 7

Reductions** 562

AMS-I.A. ver. 12

21060

Methodology*

Reductions**

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 Germany mills by Avinash Bhosale group at Bhambarwadi, Maharashtra

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

Methodology*

Reductions**

Registered

Title

Annex 1 Parties

18 Jul 05

5 MW Dehar Grid-connected SHP in Himachal Pradesh, Germany India

AMS-I.D. ver. 5

16374

16 Dec 05

10.25MW Chunchi Doddi Grid-connected SHP in Karnataka, India

Germany

AMS-I.D. ver. 5

25490

11 Feb 06

6MW Somanamaradi grid connected SHP in Karnataka, Germany India

AMS-I.D. ver. 7

16977

30 Apr 06

Lohgarh, Chakbhai and Sidhana Mini Hydroelectric Projects

AMS-I.D. ver. 7

25347

30 Sep 06

Mahatma Gandhi Hydro Electric Tail Race Hydro Power Japan Project of APPL, India

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 Switzerland Karnataka, India

ACM0002 ver. 6

100386

01 Jun 07

20MW Samal Grid-connected Hydroelectric Project in Orissa, India

ACM0002 ver. 6

106789

162

GREAT BRITAIN

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

25 Nov 07

2.2 MW hydropower plant in Birsinghpur, Madhya Pradesh of Ascent Hydro Projects Limited (AHPL)

30 Mar 08

AMS-I.D. ver. 11

13582

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

Registered

Title

Netherlands

Annex 1 Parties

Methodology*

Reductions**

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

GREAT BRITAIN

AMS-I.D. ver. 5

26300

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

GREAT BRITAIN

AMS-I.D. ver. 9

66785

08 Sep 07

10 MW biomass based renewable energy generation for Switzerland the grid in Amaravathi District of Maharashtra

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

Registered

Title

Annex 1 Parties

03 Sep 06

SIDPL Methane extraction and Power generation project

29 Sep 06

Switzerland Sweden France

Methodology*

Reductions**

AMS-I.D. ver. 8 AMS-III.H. ver. 1

31966

Methane recovery and power generation in a distillery GREAT BRITAIN plant

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 Switzerland GREAT BRITAIN Limited (in JPL unit 1), at Torangallu in Karnataka, India

ACM0004 ver. 1

767325

12 Jan 07

Use of waste gas use for electricity generation at JSW GREAT BRITAIN Energy Limited

ACM0004 ver. 1

811566

28 Aug 09

Biogas CDM Project of Bagepalli Coolie Sangha

AMS-I.C. ver. 13 AMS-I.E.

42855

* 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)

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

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)

geothermal (0)

all (50)

1) Barriers Identified by the Project Participants in the Barrier Analysis 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

technical barriers (and/or uncommon practice to use this technology)

--

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

political barriers (and barriers due to prevailing practice)

--

laws and regulations (1)

bureaucratic institutional framework (2)

--

uncommon practise due to existing policy (1)

--

4

social barriers (lack of awareness and local support)

--

--

--

--

lack of awareness among farmers (1)

--

1

other barriers

--

--

natural disasters / bad geological conditions (1)

--

--

--

1

investment barriers (lack of financial incentives without the CDM)

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) --

(7)

(13)

24604

(4)

--

--

2) Contribution to Sustainable Development According to the PDD Impacts on the Environment mitigate greenhouse gas emissions

2

16

17

6

9

use clean energy and protect environment (additional to GHG reduction)

2

14

9

3

6

improve livelihoods of people esp. in rural areas (quality of live / energy security)

2

11

9

2

7

--

31

create local employment and improve economy

--

13

14

4

8

--

39

empower human and institutional capacity / education / training

--

--

1

--

1

--

2

1

3

1

--

14

50 34

Socio-economic Impacts

Further Political and Technological Impacts help to stimulate growth of RE in China

--

9

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.

164

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

Out of 644 energy industries related projects in China (December 2009), 50 have been selected. CDM Host country: People’s Republic of China

solar energy (2 projects) wind power (16 projects) hydropower (17 projects) biomass(6 projects) biogas (9 projects) geothermal (0 projects) (50 projects) Methodology *

Reductions **

25 Mar 09

Registered

Federal Intertrade Pengyang Solar Cooker Project Netherlands

AMS-I.C. ver. 12

35723

31 May 09

Federal Intertrade Hong-Ru River Solar Cooker Project

AMS-I.C. ver. 12

35723

Methodology *

Reductions **

Registered

Title

Title

Annex 1 Parties

Netherlands

Annex 1 Parties

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

Japan

ACM0002 ver. 6

125557

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, Japan Xinjiang of China

ACM0002 ver. 6

83468

24 Oct 08

Inner Mongolia Chifeng Bolike 50MW Wind Power Project

GREAT BRITAIN

ACM0002 ver. 6

139064

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

GREAT BRITAIN

ACM0002 ver. 6

758787

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

GREAT BRITAIN

ACM0002 ver. 9

246058

28 Dec 09

Heilongjiang Shaobaishan Wind Power Project

Switzerland

ACM0002 ver. 8

128442

Registered

Title

Annex 1 Parties

Methodology *

Reductions **

18 Dec 05

Yuzaikou Small Hydropower Station

Sweden, Austria, GREAT BRITAIN

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 Netherlands County, Xiangfan City, Hubei Province, P.R. China

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

Japan

ACM0002 ver. 6

118057

26 Jan 09

Sichuan Erdaoqiao Hydropower Project

Japan

ACM0002 ver. 6

208868

13 Feb 09

Sichuan Greenleaf (Lvye) 60MW Hydropower Project

Japan

ACM0002 ver. 6

234357

29 Mar 09

Xinjiang Uygur Autonomous Region Tekesi River Shankou Hydropower Station

Netherlands

ACM0002 ver. 6

471637

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

AMS-I.D. ver. 6

40480

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

11 May 09

Gansu Datonghe Tiecheng Hydropower Station Project

Japan

ACM0002 ver. 6

177335

12 May 09

Sichuan Guohe 20MW Hydropower Project

GREAT BRITAIN

ACM0002 ver. 6

106951

18 Jun 09

Sichuan Ya’an Shaping Hydropower Station Project

Netherlands

ACM0002 ver. 6

167556

14 Jul 09

Shijiazhou 45MW Hydropower Project in Hunan Province, China

Netherlands

ACM0002 ver. 7

158886

02 Jan 10

Hubei Enshi LaodGreat Britainou Hydropower Station

Japan

ACM0002 ver. 7

238245

Registered

Title

Annex 1 Parties

Methodology *

Reductions **

12 Mar 07

Shandong Yucheng Xinyuan Biomass Heat & Power Japan (“Yucheng Biomass CHP”) 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

GREAT BRITAIN

ACM0006 ver. 3

123558

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

GREAT BRITAIN

ACM0006 ver. 6

154771

02 Nov 09

Heilongjiang Wangkui 50MW Level Biomass Cogeneration Project

GREAT BRITAIN

ACM0006 ver. 6

321105

Registered

Title

Annex 1 Parties

Methodology *

Reductions **

18 Dec 05

Nanjing Tianjingwa Landfill Gas to Electricity Project

Switzerland GREAT BRITAIN

ACM0001 ver. 1 AMS-I.D. ver. 6

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

Japan

ACM0004 ver. 2

216685

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

20 Dec 09

Guangzhou Zhujiang Beer Methane Recovery Project

Switzerland

AMS-III.H. ver. 13 AMS-I.D. ver. 13

246107

1065397 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)

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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)



Think Global, Act Local?