|
Although the Kyoto Protocol, ex
ecuted in 1997, isn’t yet in
force because it depends on ratification by the major contributors of the greenhouse gas effect (especially the United States), members of the European Union and companies from those countries are already concerned with the implementation of the Clean Development Mechanism (CDM). Several European countries have decided to follow the protocol, which establishes for the first commitment period (2008 to 2012) an average reduction of 5% in emissions, based on 1990 data. Since the cost of observing these goals is extremely high, using CDMs and acquiring carbon credits from developing countries, Brazil being one of them, comes as a solution that presents one of the greatest potentials for negotiation (by the way, the CDM was created based on a Brazilian proposal).
The director of FGV Projects, Cesar Cunha Campos, says a contract was executed with the Ministry of Development, Industry, and Foreign Trade, involving studies that will lead to the creation of a domestic market for the reduction of greenhouse gas emissions (GGE), in order to allow carbon credits to be offered to foreign governments and companies even before the enforcement of the Kyoto Protocol.
In the beginning of 2004, Cesar Campos and the president of the Getulio Vargas Foundation (FGV, Fundação Getulio Vargas), Carlos Ivan Simonsen Leal, visited Paris where they met representatives of the state bank Caisse des Dépots et Consignations. Caisse is creating an investment fund aimed at CDM projects. At the present moment, FGV is also analyzing the establishment of partnerships to help the market develop such projects.
These partnerships have already generated some results. In 2002, FGV published A Clean Development Mechanism Guide (O Mecanismo de Desenvolvimento Limpo – Guia de Orientação), sponsored by the National Bank of Economic and Social Development (BNDES, Banco Nacional de Desenvolvimento Econômico e Social) and by the United Nations Conference on Trade and Development (Unctad). In addition to professionals from FGV, BNDES, and Unctad, collaborators from the Ministry of Science and Technology (MCT, Ministério da Ciência e da Tecnologia) and from the law firm Motta, Fernandes Rocha – Advogados (MFRA) also gave their contributions to the guide. The preface states: “The guide was based on the Kyoto Protocol and the Marrakech Agreements, executed in the Seventh Session of the Conference of the Parties of the United Nations Convention Panel on Climate Change – COP-7, held in November 2001, in Morocco. It also includes the model containing the guidelines of the Project Conception Document, as well as the modalities and procedures for small projects approved during COP-8, held between October 23 and November 1, 2002, in New Delhi.”
Economist Virgílio Gibbon, one of the guide’s authors, said the Ministry of Development is interested in stimulating the supply of projects aimed at reducing carbon emissions. “With this purpose, the ministry wanted on one hand, the development of internal conditions for attracting entrepreneurs and, on the other hand, the creation of a domestic market for such reductions,” he explains.
In addition to reforestation and forestation programs, says Virgílio Gibbon, the most promising area is that of energy projects. In Brazil, there are conditions for the development of alternative sources – wind, solar, biomass – that result in the reduction of emissions. Although there are many gas-fueled thermal plants in the planning and construction phase, Brazil’s energy matrix is relatively clean. There are also projects for sanitary landfills and for the transportation sector – for instance, the construction of new subway lines. It’s complex work, for the volume of emissions would need to be measured based on the features of surface vehicles in order to obtain baseline values that allow reductions to be estimated.
Virgílio Gibbon believes in the future of domestic negotiation:
“I believe it’s going to be a milestone. The Kyoto Protocol created a basic regulation. What we have done, as a suggestion for the domestic market, was to establish a procedure that’s extremely similar to that of the protocol. Basically, in the domestic market we would need to develop a project observing protocol requirements, validated and certified by a company accredited by the Executive Board that is already being formed at the UNO. Thus, a project developed as previously described, that is, validated and certified by an accredited company, will most likely be accepted abroad. It becomes a project with a differential, having a higher value if compared to others developed without this institutional structure. We’ve met with the Futures and Commodities Exchange (BM&F, Bolsa de Mercadorias & Futuros), and what we have in mind is creating a market for expected reductions, which is the asset we’re creating, and for certified reductions. What’s that? Expected reductions involve the following: someone has a project, which is validated by an accredited company. The project will be implemented in the future. However, just the expectation that it will reduce emissions – the so-called expected reduction – already has a demand. The BM&F would negotiate that in several operating modes. After project implementation and emissions reduction is proven, we’ll have a certified reduction, which would imply a price upgrade. The purpose is to attract foreign capital to the country. It’s a bet on the reduction of emissions. And this speculative capital could be attracted in the short term, for it’s exactly in this phase of the market that profitability margins are high.”
According to Virgílio Gibbon, there is a demand for these assets at the present time, especially in countries such as Brazil, India, and China. However, Brazil needs to stand out:
“Internally, a high credibility market needs to be organized. That will determine different prices. There are other very interesting aspects. Let’s imagine an emission certified domestically, that is very likely to be accepted abroad. This company submits this project to an assessment abroad, and it’s approved. The holders of such domestic certified reductions, upon project approval abroad, will have an international asset. Then, BM&F would be able to promote an international auction with this asset, attracting foreign capital, because the final investors are foreign. The European Union has determined a fine, for the period from 2005 to 2007, of 40 euros per ton of carbon for countries that don’t meet their goals. Therefore, this credit might be worth as much as 40 euros. Today, the market pays between three and five dollars per ton. This is what goes on in a speculator’s mind: if the market currently pays between three and five dollars per ton and there’s a 40 euro fine, acquiring such credits is good business.”
The guide prepared together with BNDES and Unctad provides information on the projects. For instance:
In order to become Certified Emission Reductions (CERs), CDM project activities must go through the following Project Cycle steps:
1. Preparation of the Project Conception Document (PCD);
2. Validation/Approval;
3. Registration;
4. Monitoring;
5. Inspection/Certification;
6. Issue and approval of CER’s.
Further in the guide, each phase is explained in more detail. Here’s a summary:
1. PCD preparation is the first step of the project cycle. All information required for validation/registration, monitoring, inspection and certification must be contemplated.
2. Validation is the independent assessment process of a project activity by a designated operating entity as per CDM requirements, based on the PCD.
3. Registration is the formal acceptance by the Executive Board, of a validated project as a CDM project activity.
4. Monitoring. The project’s activity monitoring process includes the collection and storage of all data required for calculating the reduction of greenhouse gas emissions, as per the base methodology established in the PCD.
5. Inspection refers to the periodic, independent audit project for reviewing the calculations about the reduction of greenhouse gas emissions or CO2 removal resulting from a CDM project activity, sent to the Executive Board through the PCD. Certification is a written guarantee that a determined project activity has reached a certain reduction level of greenhouse gas emissions for a specific period of time.
6. Issuance. The final step, when the Executive Board is sure that, observing all steps, the greenhouse gas emissions resulting from project activities are real, measurable and long term, and therefore can originate a CER.•
|
