Copenhagen, besides being the home to COP15, is also famous for its association with the fairytale author Hans Christian Andersen, who famously wrote "The Little Mermaid."
Furthermore one of Copenhagen’s best loved landmarks is the statue of the Little Mermaid, immortalized by various cartoons, and periodically decapitated by the Burghers of Copenhagen. Her head has been replaced three times already and the location of where the missing heads went is part of Danish folk lore.
In a similar spirit the Clean Development Mechanism Executive Board (CDM EB) which oversees, among other things, renewable energy projects in the developing world under the Kyoto Protocol, made a recent decision that metaphorically chopped the top off a number of Chinese windmills.
As with the story of ‘The Little Mermaid,’ it had previously been assumed that renewable energy projects were popular. The issue at stake is tariffs. The EB suspects, but admits it has no evidence either way, that wind tariffs may have been set at a level that relied on the CDM to make them profitable. The Global Wind Energy Council, which are highly regarded as experts in this area, has submitted a report to the EB outlining why the EBs suspicions are, in their opinion, without foundation but this report seems to have had no apparent effect. The CDM EB rejected the applications from the Chinese wind farms so they won't receive carbon credits. It seems like quite an odd decision as one of the points of the CDM is to make unprofitable projects profitable. Indeed it’s a requirement, otherwise projects can’t be registered.
To put the question of tariffs into context the current carbon price can’t make a wind project profitable in isolation, so the achievable electricity price becomes a key issue. Guaranteed renewable energy tariffs are a way of balancing out the economics so that projects become viable and attract investment. Indeed very early on in the CDM's history it was decided that in order to prevent the CDM from dis-incentivising developing nations from instituting environmentally friendly policies, such policies would not be considered when assessing CDM projects, this is the so called E+/E- decision.
Quite how the EB knits together taking wind tariffs into consideration and at the same time not preventing progressive environmental policies, is as mysterious as the current location of the Little Mermaid's missing heads. Well more so, as a short conversation in any bar in Copenhagen will illicit claims of knowledge as to the location of at least one of her heads. However, by way of contrast in-depth conversations with the EB haven’t seemingly resolved the issue of E+/E- decision and wind tariffs.
Undeterred the EB during its Q and A presentation at COP15 clearly communicated that they believed that something was amiss and refused to change their position, prompting the Chinese delegation in a quite extraordinary move to question the EBs rationale in the plenary. Li Gao from the Chinese delegation, as reported in Bloomberg, stated that China in relation to the EB Chinese wind decision was experiencing “unprecedented difficulties and barriers, part of which are caused by the irrational, non-transparent and unfair decisions.”
Hopefully before leaving Copenhagen the EB will provide clarity with regards to a renewable energy policy and one that doesn’t dis-incentivise supportive environmental policies. Let’s see if this fairytale has a happy ending!
Miles Austin is head of European regulatory affairs for EcoSecurities.
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