Potentials and barriers for end-use energy efficiency under programmatic CDM

Zhu, Xianli
Fenhann, Jørgen
Cheng, Chia-Chin
Hinostroza, Miriam

2007

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Despite the paucity of projects in this sector, EE holds much promise for reducing emissions generated by sustained growth and increasing energy security in developing countries. Energy-efficient options are not common practice due to well-documented barriers such as lack of information on the part of consumers, absence of an appropriate policy framework, and most importantly, the split incentive barrier: Those who make the decision on EE investments are, most often, not the final users who pay the energy bill. As a financial mechanism that provides an additional income flow, the CDM could help overcome some of these barriers, particularly if efficiency measures are pursued as PoAs [program of activities]. This paper seeks to guide the reader into pCDM by reviewing the evolution of the concept, explaining the rules and modalities, examining current methodologies and project pipelines that could accommodate programmatic EE activities, and investigating new potential project areas. The discussion concludes with a case study. Section one examines the treatment of policies in the CDM, and analyzes the COP/MOP 1 decision to include programs in the CDM. Section two examines the existing and proposed CDM methodologies and projects in the pipeline, and underscores difficulties in the current CDM stipulations for project realization. Section three reviews potential areas for EE improvements, the niche for pCDM and for other end-use EE projects. Finally, section four presents a case study in Peru that is used to illustrate and discuss the methodological issues involved in designing and implementing EE programs under the CDM. The case study shows that pCDM offers a promising framework to maximize sustainable development benefits through the inclusion of long tail residential/small business sectors in developing countries, and real incentives to promote EE improvements. The restriction to one methodology does, however, limit the possibility of catalyzing large-scale initiatives that involve system-wide efficiency improvements and integrated optimization. [Extractos: Resumen Ejecutivo, Introduction]

Perú; Mecanismo de Desarrollo Limpio (MDL); Eficiencia energética;