15 September, 2010
www.carbon-financeonline.com
A controversial Ugandan hydropower project is making its second
application for approval under the Clean Development Mechanism (CDM),
drawing criticism from an environmental NGO.
California-based International Rivers says the 250MW Bujagali dam
project on the Victoria Nile river in Uganda should not be eligible for
the CDM and would have gone ahead regardless of approval under the UN
mechanism.
A CDM project must prove that its emission reductions are additional to
those that would otherwise occur. But Payal Parekh, International
Rivers' climate programme director, noted that the Bujagali dam project
is already partially complete.
"The dam is going to be built whether or not they get CDM funding. It's
already happening," she told Carbon Finance.
This is the second time the Bujagali dam has applied for approval under
the CDM. Its first application was withdrawn after the original
developer, AES, decided to discontinue the project.
In its latest application, project sponsor Bujagali Energy said the
hydropower dam will provide access to energy from renewable sources,
cheaper electricity and promote economic growth.
The project is funded by an undisclosed amount of equity and $682
million of debt, and could create 6.3 million carbon credits over a
seven-year crediting period, worth about $110 million at today's prices.
However, Parekh argued the developers are simply chasing additional
funding sources, claiming that the cost of the project has been revised
to benefit its CDM application.
"The project has always argued that it is the least-cost option and now
suddenly, because they want CDM credits, it's not viable without CDM
funding. So they're contradicting themselves," she said, adding that
many project participants, particularly in developing countries, view
the CDM as the "sugar coating" on top of basic project financing.
She said: "It's an extra source of money. It's not essential for the
project but if you can get it, why not?"
While Parekh welcomed the trend toward increased scrutiny of CDM
applications, she said for the CDM board to identify what would have
happened in a given scenario is an "impossible job".
"We'd like to see the CDM scrapped," she said. "We don't think it can be
reformed because you can never prove additionality."
International Rivers - which has campaigned against Bujagali prior to
the project's bid under CDM - also opposes the project on grounds that
it will threaten local riverways, fisheries and land, and will have a
negative impact on local inhabitants.
Lawrence Aribo, a senior project officer with the Ugandan government's
climate change unit, said the Bujagali project is at the validation
stage.
There have long been concerns over the limitations of the CDM in Africa.
For example, critics point to problems with existing methodologies in
measuring emissions, particularly given that a high portion of the
continent's population is not connected to the grid.
The UN has previously launched initiatives to encourage more CDM
projects in Africa.
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