Memorandum submitted by Rajan Pandhare
1. REASONS OF
ACCEPTANCE OF
VERS (VOLUNTARY
EMISSION REDUCTIONS)
— In the developing world, VERs help
small, programmatic Green House Gas (GHG) reduction activities
at micro level, (with each activity ensuring a small GHG reduction)
such as:
(i) Adoption of solar lighting, heating,
pumping devices and other related devices.
(ii) Small Bio-mass gassifiers, micro hydro
projects, bio-fuel based DG sets.
(iii) Small methane prevention projects (animal
husbandry in rural areas, dairy).
In a normal CDM project development scenario,
the complexity of project development, long lead time for approval,
and costs will deter project participants from undertaking these
projects. All such projects not only deliver on the social impact
but also play a role in reduction of GHG.
— VERs generated from plantation activities
is crucial but difficult to justify using CDM methodologies. Plantation
(afforestation, reforestation and prevention of de-forestation)
can form a very important part of global GHG reduction and environmental
improvement strategies.
— Adoption of New Products Technologies
for which a rigorous methodology development under CDM may be
difficult (due to verification and monitoring problems), may be
supported by the concept of VER (ex: adoption of micro-turbines,
adoption of efficient lighting systems and controls for urban
areas).
— Business needs "high certainty
(reduced risks) of economic gains" to make investment decisions.
However current CDM processes make the registration of a project
highly "uncertain"—even for approved methodologies,
and even if similar projects are approved before, the chances
that a particular project may be rejected are high!. This actually
leads to a perverse situation: a business decides to make the
investment only when the project is viable without CDM benefits
and treat CDM benefits as a "bonus". But this ensures
that most CDM projects proposed for registration are not truly
"additional"—which is contrary to the objectives
of CDM. VER processes however reduce this uncertainty, because
of higher tolerance level and less complex processes. VER's therefore
may truly support "additional" projects.
— The perceived risk of VER projects
is that, although they may be supporting environmentally positive
areas but may not be truly additional (may support activities
which may be financially viable or may have no technological barrier,
or "may" have leakages not so clear to observers in
the beginning). However from system perspective, over long term,
VER transactions will result in ultimate reduction of GHG emission's
and will be environmentally and socially positive (because of
VER's focus on the latter).
— Sometimes VER's from renewable energy
projects, say, are financially not additional (have attractive
returns). This may be true for some hydro power projects or wind
power projects. However general market acceptance of VERs from
such projects will make it easier for project developers to forecast
the VER benefits from such projects and factor in a price. The
normal effect of some projects sneaking in without genuine additionality
would be higher availability of VER's or reduced prices for VER
v/s CERs. This should be acceptable because it encourages genuine
investment interest based on ERs, and makes project implementation
faster. Renewable Energy Certificates in US is a similar scheme-
it uniformly rewards all renewable energy projects irrespective
of their additionality.
— The other environmental and social
factors related to a project will help the VER sale to customers—VER's
without great impact on these dimensions may not find any takers
or will be priced low. This is different from a strict compliance
oriented scheme of CDM where large sums of money are earned by
HFC-23 kind of projects, without any social impact.
In summary, I strongly propose that there be
some VER standards for project qualification, measurement, verification
and registration. A standard and bouquet of methodologies which
evolves (like Linux) may be a good idea to make VER's acceptable.
However the complex assessment of additionality and baseline choices
should be simplified.
VERs will have a much more of a bigger impact
globally then CERs on their own. VERs not only drives GHG reduction
but equally enhance on social impact. This dual benefit should
not be ignored by the government as it conducts this inquiry.
Government support is crucial for VERs- it will help make VER's
legitimate in the eyes of the world. Since VER's are important,
government should legitimatize VER buying by being a buyer itself.
2. MY BACKGROUND
I am a senior member of President Clinton's
HIV/AIDS Initiative (ex Dy Chief Operating Officer, Country Director
of India and Cambodia) for the last three years. Prior to this
I used to run software companies. I am also a board member of
CARE International UK and The Children's Investment Fund Foundation,
a leading financial donor for children related programs (healthcare,
education, water and sanitation) across Africa and India. I am
also a board member of VERpool Limited which is engaged in using
the financial benefits of VERs to support high impact and sustainable
social programs across the world.
December 2006
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