Clean Development Mechanism Created Power Research Paper
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Criteria of buyer/investor on project type and location
A huge variety of CDM project locations, types and sizes exists and these are open to potential CDM investors. The national investment climate plus factors at the national level influence decisions on where, what type of projects to undertake as well as whether they ought to be developed as CDM projects. The investor's role in CDM project influences the physical spread of the CDM market. For instance, a technology provider who is offered payment partly via CER revenues may have a broad list of options of potential areas where to locate the project but a smaller choice of project type to engage in. Some funds set aside and intended for CDM funding have been decided upon as intended for specific project types and specific geographical areas. For example, the Spanish Carbon Fund directs its energies towards establishment of CDM projects in North Africa, South & East Asia as well as Latin America. Some benefactors of funds also state the minimum sizes of projects to be funded. Rules governing design of varying local/international emissions trading systems can also influence demand for different CDM credits and in turn, the geographical distribution of CDM projects?
Barriers emanating from international CDM framework.
Frameworks negotiated for CDM up to 2012 may hamper the development and creation of certain forms of CDM projects. Impediments/stumbling blocks can result from delays in agreeing such frameworks. Uncertainties pertaining to CDM methodology process as well as approval of project may also stand in the way of various projects/project types.
International Process Related Issues
International institutions and guidance keep on undergoing gradual change. CDM was established way back in 1997 but the framework for CDM project establishment was agreed upon in 2001. These frameworks plus guidance on particular issues keeps on changing with regard to large scale and small scale CDM and for emission reduction projects as well. The international structure of governance of CDM was purposely set up to put a check on emissions. The working of the multi-national section of the CDM approval process has been faulted as being too slow and too unpredictable.
Consensus pertaining to eligibility of proposed projects
There are sometimes delays in obtaining consensus for eligibility of CDM projects as well as how such can be assessed. There is a delay for example in determining the eligibility of carbon capture and storage in geological formations as a CDM activity and no deal has been concluded regarding CDM eligibility of HFC-23
reduction from the HCFC-22 premises. Multinational decisions on eligibility of CDM could have an effect on geographical distribution of CDM projects. The IPCC has identified used up oil and gas fields as suited for geological carbon collection and storage. Any deal to permit CCS
projects to come up with credits under CDM will greatly increase CDM operations in some oil and gas producing nations. This would result in skyrocketing of CDM potential in Middle East nations though not in Africa.
Uncertainty about post-2012 framework and carbon prices
There is lack of knowledge about the potential requirement for CDM credits after 2012 since the climate pattern for that period has not been determined. Although current CDM projects can generate credits for many years to come, the credibility of credits produced before 2012 is much higher than those to be produced past 2012.There is also uncertainty regarding the economic value of a single CDM credit, both before and after 2012. CER prices also varied from one project to another depending on project size, risk surrounding the project as well as location of the project. These uncertainties influence what type of CDM projects take place and therefore may act as barriers to CDM.
Ovade Ogharafe gas capture and processing plant
Lemna Energy Resources built a major plant for compression of gases in Nigeria for two major corporations, namely the Nigerian National Petroleum Corporation and the Pan Ocean Oil Corporation. Lemna Energy Resources won the tender to build this plant known as Ovade-Ogharafe Processing Plant. Once this plant is operational, the gas flared will be used to generate electricity. The M.D. Of Pan Ocean Oil Corporation, Mr. Festus Fadeyi spoke to newsmen saying, "This plant (Ovade-Ogharafe Processing Plant) will comply with the directive issued by the State of doing away with wasteful flaring of gases by the year 2008." Indeed this Ovade-Ogharafe project will fit well with Lemna's environmental purpose by reducing injurious emissions and producing power in an environmentally friendly manner. This project was founded with the
intention and aim of reducing gas flaring at the Ovade Ogharefe oil field. In November 2005, the Nigerian Federal High Court ruled that the piece of legislation allowing for continued flaring of gas as an unconstitutional law and therefore "null and void." Shell company and its Nigerian partner were immediately ordered to halt all further gas flaring operations. The Court also directed the Nigerian Attorney General to amend the law permitting the flaring of gases.
Asuokpu/Umutu gas recovery and marketing facility
This facility lies in the Northern Delta Depobelt located in Western Niger Delta. It is situated on the Asuokpu/Umutu Field which was awarded to Platform Petroleum Limited. The field is owned through a joint venture agreement by Platform Petroleum Limited and Newcross Petroleum Limited (with a sixty to forty Equity ownership) (PPLtd and NPLtd, 2008). The Asuokpu/Umutu Gas Recovery and Marketing Facility is the fourth CDM facility in Nigeria. It was secured and registered by Platform Petroleum Company Limited according a framework by the United Nations Framework Convention on Climate Change (UNFCCCC) Clean Development Mechanism (CDM). The programme has the reference number (3740) and is to conduct various activities aimed at the recovery of dry associated gas which is abundant at the Asuokpu/Umutu marginal field and then delivering it to the domestic Nigerian market for use as energy product. The project entails the installation of brand new compression facilities close to the Umutu oil facilities together with a forty five kilometer pipeline to be used in transporting the gas from the marginal field at Asuokpu/Umutu to the already existing gas network/system located at Kwale in the Delta State. The product is then to be transported further to Nigerian Agip Oil Company (NAOC) gas network to be use in the Niger delta region (Obayagbona,2010).
Impact of CDM in creating power sustainability in Nigeria
Extant literature has been dedicated to the study of the link between CDM and sustainability. The early studies conducted between 2000 and 2001 prior to the Marrakech Accord attempted to analyze the potential future contribution of the CDM project to sustainable development. There are studies that are dedicated to the how to predict and the extent to which CDM can improve sustainable development goals as pointed out by Austin and Faeth (2000).Yet again other studies were dedicated on whether CDM would improve or impede sustainable development (Banuri and Gupta,2000).Other studies are dedicated as to whether the CDM can be used to leverage development as pointed out by Mathy, Hourcade et al. (2001).In the Nigerian context CDM has potential in positively impacting the local economic development as well as significantly reducing emissions. This is only true if there are ways of creating viable local market for the product (gas) such as power generation or use as Liquefied Petroleum Gas (LPG) for use in home cooking (Financial Nigeria,2008).
The reality is that for a sustainable and mid to long-term program to take off for the purpose of reducing and eliminating the gas flaring could greatly benefit Nigeria from the carbon finance which act as part of a risk mitigation package for the energy sector. This would be in line with the Government's moves to transform the energy sector to be attractive for investors through the government's proposed gas supply obligation as well as a new gas policy
Lack of appropriate CDM methodology
The main drawback to the achievement of sustainability in the Nigeria energy sector through the use of CDM is the lack of any form of approved CDM methodology that is to be used in allowing the carbon credits for the grid-connected electricity and gas-generated one to replace the off-grid generation.
The Nigerian CDM energy projects
The existing projects are being carried out by Global Carbon Market who is planning mega projects. These mega projects include the construction of three hydro dams as well as methane capture projects. They are also to be involved in tree planting / afforestation projects in desert prone areas of Northern Nigeria.
Potential for CDM in Nigeria
Studies indicate that Nigeria has huge CDM potential since areas such as cement industries, breweries and landfills which need to be equipped with the latest energy efficient technology.
In conclusion, even if CDM "success" in various countries can be quantified, an even distribution of the portfolio of CDM is highly unlikely. This is because, internationally arrived at consensus on CDM eligibility limits which measures of mitigation can be developed as CDM projects and…
Sources Used in Documents:
Austin, D. And Faeth, P (2000). Financing Sustainable Development with the Clean
Development Mechanism. World Resource Institute, Washington, D.C.
Banuri, T., Gupta, S., (2000). The Clean Development Mechanism and Sustainable
Development: An Economic Analysis. Asian Development Bank, Manila.
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