Credit Your Carbon (Part 1 of 2)

The international carbon trade presents a viable eco-friendly incentive supporting an international consensus towards alternative energy. It stems from industrialized countries’ greenhouse gas (GHG) emission limits, with Certified Emission Reduction (CER) aka “carbon” credits awarded for unutilized emissions. Countries exceeding their emission limits compensate by purchasing CER credits – one CER credit per excess ton of carbon dioxide equivalent (tCO2e) – generated by nations with below-quota emissions. This also applies to corporations: those exceeding emission limits can purchase credits from carbon credit brokers; those emitting below quota can sell earned credits.

CER credit prices are subject to Supply and Demand, currently escalating as Global Warming’s effects worsen. European Climate Exchange contracts average at €13.52 ($18.11)/tCO2e (December 2008) contracts); the Asian Carbon Trade Exchange prices range from $23-$30.

Carbon credits incentivize developed countries to go green, certainly rewarding the EU’s goal to reduce 1990 level emissions by 8%, by 2012. Likewise, London’s Sindicatum Carbon Capital, pooling investments from the US and Dubai, has allocated $280 million for renewable energy (RE) projects worldwide. The European Investment Bank pledged €125 million to fund carbon emission projects scheduled up to 2022 – 10 years after the Kyoto Protocol’s expiration, a limiting factor to long-term projects.

President-elect Obama, guaranteeing “the single largest new investment in national infrastructure”, aside from creating new roads and bridges, plans to make public buildings more energy efficient, reducing foreign oil dependence, and generating 3.2 million jobs by 2011.

Green Fields

Fortunately, the United Nations Framework Convention on Climate Change (UNFCCC) exempts developing countries like the Philippines, China, and India from GHG emissions; the premise being industrialization inevitably emits pollution. Limiting emissions would therefore necessarily hinder a country’s growth.

The alternative is the Kyoto Protocol’s Clean Development Mechanism (CDM), which encourages developed countries to invest in GHG-reducing projects in developing countries, in exchange for CER credits – bringing potential opportunities for our energy entrepreneurs. Participation in the CDM, through joint ventures with developed countries seeking to increase alternative energy profiles or reduce GHGs, will simultaneously develop our alternative energy capacity while boosting Foreign Investment Inflows.

Characteristic of her economic – and environmental – foresight, the President already announced the seeking of Swiss investments for RE development; apt partners, as 58% of Switzerland’s electricity stems from alternative energy.

The Wind Beneath our Wings

The developing world is receiving massive CDM investments. India hosts 30% of total CDM projects, projected to offset 31,760,156 tCO2e annually. China’s 317 projects (25.48%) are estimated to annually reduce 124,452,943 tCO2e.

We have vast renewable energy (RE) potentials. Our geothermal energy potential is second in the world, following the US. Currently, it comprises 27% of our total electricity production. Our wind and hydropower can potentially provide 89,697MW of energy, combined.

Operating facilities like the Ilocos Norte Bangui Bay wind farm, our first registered CDM project, proves our capacity – and viability - for alternative energy production. Run by NorthWind Power Development Corp. the $48-million project partly financed by the Danish government generates about 33MW. It currently offsets approximately 57,000 tCO2e annually, each tCO2e valued (by NorthWind-Worldbank CDM) at $4.25, for $242,250 additional annual revenue, above other commercial revenues earned through power provision to Ilocos Norte. The plant commits to offsetting 358,000 tCO2e yearly, producing credits for sale to the World Bank, and other interested bodies.

The Philippines currently only has 20 registered CDM projects, reducing about 731,611 tCO2e in greenhouse gases (GHG) annually, potentially worth $2.9-$7.3 million, far below our $100-million revenue projection. Other RE sources await JV development with other countries.

International carbon credit brokerage firm EcoSecurities estimates the Philippines to potentially generate a maximum of $100-million annual CER revenue for the next five years. At $4.25/tco2e, that’s about 23.5 million saleable credits. Projects like Bangui accounts for only .2%!

Project Registration and Implementation

Interested in participating in the CDM? The following will provide an overview of the accreditation process:

1. Implementing a CDM project requires partnership with an industrialized country (the participant). Partnership can be through the participant’s utilization of our RE resources for GHG-reduction projects, or investments in already-existing local projects.

2. Upon the Philippines’ consent of the participant’s project involvement, the participant presents the project to the appropriate Designated Operational Entity (DOE) (the list of entities are available at http://cdm.unfccc.int/DOE/list/index.html) stating its carbon emission reduction effectiveness.

3. The DOE, upon project validation per UNFCCC criteria (like measurable long-term emission reductions), presents a project design document (PDD, available at http://cdm.unfccc.int) indicating details like host and participant countries, and projected carbon emission reductions, to the CDM Executive Board (EB).

4. The EB evaluates then either approves or rejects the project.

Welcoming foreign investments via CDM-approved projects will increase CER revenues, bringing our Capital Account additional funds.

The next article will further examine the Philippines’ current CDM participation, indicating other potentials in harnessing renewable energy.

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