Environmental Engineering Reference
In-Depth Information
Commission, the EU emissions trading scheme
(ETS) is based on a recognition that creating a
price for carbon through the establishment of a
liquid market for emission reductions offers the
most cost-effective way for EU Member States to
meet their Kyoto obligations and move towards
the low-carbon economy of the future. It works
through the distribution of permits to pollute for
each EU member state, who distributed these
permits to their big industrial emitters who either
reduce their emissions at source, buy CERs from
offset projects in the CDM, or buy EUAs from less
emitting installations within the EU ETS. Those
installations that have excess EUAs can sell them
into the EU ETS. After each phase (the first one
lasted from 2005-2008, the second now ongoing
between 2008-2012, and the third is legislated
from 2012-2020) the cap is tightened meaning
less free EUAs are given out at the beginning
and greater reductions must be made to reach the
target. The market is EU-wide but taps emission
reduction opportunities in the rest of the world
through the use of the CDM and allows for links
with compatible schemes in other countries.
As of May 2010, over 5,100 projects have been
submitted to the CDM, excluding those that have
been terminated, rejected or withdrawn. About
900 million CERs are expected to come from
these projects by the end of 2012, with 407 mil-
lion CERs having been already issued from 709
projects. About 1,500 projects remain registered
that have not yet claimed CER issuance. Sudan
joined the pipeline for the first time, submitting
two projects in April. These figures speak for
themselves as to the success and development of
the carbon markets. It attests to the shift described
above of carbon as a tool for risk management in
businesses, possible through the instrumentalisa-
tion of CO
2
into a tradable asset. In Sudan's case,
it shows the importance of taking part in an inter-
nationally recognised market, thus far a wholly
effective training ground for new technologies,
and green financing. By taking part in the CDM,
risk and reputational risk more effectively. The
skillset gained from managing these projects are
invaluably applicable across other sectors.
Emissions Reducing
Projects Risk Assessed
As an example, detailed below is a risk manage-
ment approach to examining a CDM project,
developed to understand how successful the
project will be in issuing the number of CERs it
states in its original Project Design Document.
No geography or methodology was chosen in
particular, as the point is to be able to apply this
across the entire project pipeline. The takeaway is
the risk management approach—the breakdown
of the project into several broad categories with
additional risk metrics for each category. The
approach is common for assessing CDM projects
though exact risk factors vary from company to
company. However, one will quickly see that this
deliberative method can be extracted and applied
to a host of other sectors and initiatives—whether
examining new business strategies, mandates,
projects, joint ventures, and capital outlays.
I. Examining the Project Concept
The first step is examining what the project is
intending to do—does the concept make sense
objectively? The steps involved in the project
implementation should be independently ex-
amined, and whether it follows logically that
the end result (here, the CERs) will be realised.
This step includes an examination of the project
design, including methodology and technology.
It should not be overly complex and for greatest
effectiveness, should be based on understood and
accepted methods and technologies. The project
design should be able to be described in simply to
someone previously unfamiliar with the concept.
The CDM features over 300 methodologies so
rather than reinventing the wheel it is economical
from a time and money perspective to use what
