A Case Study of the Clean Development Mechanism in Colombia and Peru from
2005 until 2017
Bert Venema S1346849
b.venema@umail.leidenuniv.nl Dr. Nicolás Rodriguéz Idarraga
2017-2018 Leiden University
MA Thesis submitted in partial fulfillment of the requirements for the Master in Arts International Relations: Global Political Economy.
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Abstract
Just as the Kyoto Protocol, the Paris Agreement recognizes the fact that developing countries have fewer capabilities to combat climate change and should thus receive assistance from the developed world. Through the transfer of technology and monetary aid, developed countries are obliged to help developing countries in achieving sustainable growth. This structure of North-South cooperation was translated into the Clean Development Mechanism in the Kyoto Protocol. My thesis analyzes the implementation of this mechanism in Colombia and Peru and answers whether its goals of emission reduction, sustainable development and technology transfer have been achieved. Through a case study of two Clean Development Mechanism projects this dissertation shows the success of current climate change mitigation mechanisms in the context of two Latin American countries. Finally, I will study the equivalent of the “Clean Development Mechanism” in the Paris Agreement to answer whether problems encountered in the Clean Development Mechanism have been addressed in the Paris Agreement.
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Contents
1. Introduction ... 5
2. Theoretical Overview ... 7
2.1. Methodology ... 13
2.2. Historical Overview of Climate Change Mitigation and Action in Latin America ... 13
3. Colombia ... 17
3.1. Doña Juana Landfill Gas-to-Energy Project ... 21
3.1.1. Sustainable Development ... 23
3.1.2. Technology Transfer ... 24
4. Peru ... 27
4.1. Poechos I Hydropower Project ... 31
4.1.1 Sustainable Development ... 32
4.1.2. Technology Transfer ... 33
5. Conclusion ... 35
5.1. Looking forward towards the Paris Agreement ... 38
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List of Abbreviations
CAR Environmental Authority for the Region Cundinamarca
CDM Clean Development Mechanism
CER Certified Emission Reductions
CO2 Carbon Dioxide
DNA Designated National Authority
IRR Internal Rate of Return
MADS Colombian Ministry of Environment and Sustainable Development (Ministerio de
Ambiente y Desarrollo Sostenible)
MINAM Peruvian Ministry of Environment (Ministerio de Ambiente)
UAESP Special Administrative Unit for Public Services (Unidad Administrativa Especial de
Servicios Públicos)
PDD Project Design Document
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1. Introduction
On October 5, 2016, the Paris Agreement was successfully ratified by countries representing 55 % of the world population. As a result, the treaty came into force the following month on November 4. Deemed a revolutionary and progressive agreement, the Paris Agreement has as its main goal to keep global warming under a threshold of two degrees “above pre-industrial levels”.1 To a great
extent, the Paris Agreement relies on mechanisms already implemented in the Kyoto Protocol to ensure climate mitigation. Just as the Kyoto Protocol, the Paris Agreement recognizes the fact that developing countries have fewer capabilities to combat climate change and should thus receive assistance from the developed world. Through the transfer of technology and monetary aid, developed countries are obliged to help developing countries in achieving sustainable growth. This builds on the obligations set in the foundation of the convention on climate change where countries were divided into developed and developing (Annex I and Non-Annex countries respectively). This distinction was made because of the belief that the developed world was responsible for the harm done to the environment, and the fear that the implementation of climate mitigation strategies in the developing world would limit its possibility to grow economically.2 Among the developing
countries are Latin American countries that have also ratified the Paris Agreement as well as the Kyoto Protocol. Until now, their economic development model is based on the extraction of their natural resources.3 In the global economy, Latin America, like other countries in the Global South,
functions as a supplier of primary products such as crude oil, coals, ores and metals to the developed countries in the Global North. In the 2000s, a boom in commodity prices incentivized Latin American countries to exports its primary materials and extract natural resources from the ground. During this period, the share of primary goods in the total export increased from 27% in 2000 to 60.7 % in 2011.4
If sustainable development is to be achieved, a shift in the mode of development from an extraction-based model towards a sustainable model is needed.
In order to ensure that developing countries can also develop sustainably, the Paris
Agreement builds on the Kyoto Protocol in that it commits developed countries to assist developing countries with monetary and technological aid in order for them to acquire clean technologies. Through the Clean Development Mechanisms the Kyoto Protocol aims developed countries can assist
1 UNFCCC, “The Paris Agreement”, Accessed November 9, 2016 2 UNFCCC, “Parties and Observers”, Accessed November 9, 2016
3Hans Jürgen Burchard and Kristina Dietz, “(Neo-)extractivism – a new challenge for development theory from
Latin America,” Third World Quarterly 35.3 (2014): 468, Accessed November 10, 2016,
http://dx.doi.org/10.1080/01436597.2014.893488
6 developing countries in acquiring clean technologies, reduce emissions and achieve sustainable development. As it is too soon to assess the capability of Paris Agreement to live up to its promises, this dissertation will look at the operation of the Kyoto Protocol in achieving climate change
mitigation in the Latin American context. To guarantee that the scope of this research will not be too large for its purpose, the thesis will function as a comparative case study of the Clean Development Mechanism in Colombia and Peru. This thesis will answer how the Clean Development Mechanism
contributed to climate change mitigation and sustainable development in Colombia and Peru from 2005 until 2017.
The reason for choosing Peru and Colombia as case studies of the Clean Development Mechanism is the relative lack of research on these two countries on this topic. In contrast to countries such as Chile, Brazil and Mexico that received attention from local and international scholars, Peru and Colombia have been relatively overlooked. However, both countries did
participate actively in Climate Change Mitigation Mechanisms such as the CDM. Through assessing whether these strategies have worked from the Kyoto protocol onwards in these countries, the research will function as a case study for the viability of existing schemes to mitigate climate change. Secondly, it will also look to answer whether these mitigation strategies have inhibited Peru and Colombia in developing economically or whether it assists them in gaining access to capital-intensive green technology and prove to be a mechanism for achieving sustainable economic development. Finally, it will compare the climate change mitigation mechanism with the mechanism in the new Paris Agreement to answer whether problems encountered in the Kyoto Protocol have been addressed in the Paris Agreement.
The layout of this thesis is as follows. Firstly, it will give an overview of the concepts underlying the Clean Development Mechanism and climate change mitigation such as Green
Economy, Green Theory and North-South Cooperation. Secondly, it will give an historical overview of climate change mitigation and action in Latin America. The third part will discuss the Clean
Development Mechanism in Colombia. The example of the CDM Project “Doña Juana, gas-to-energy project will be taken as a case study of how CDMs have been implemented in Colombia. The fourth section will look at the implementation of CDM in Peru. The CDM Project Poechos I will be used as an example of the CDM in Peru. Finally, this thesis will compare the two cases and give an outlook on the viability of the new mechanisms included in the Paris Agreement.
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2. Theoretical Overview
Concepts that will be used in this dissertation are the Green Economy, Sustainable Development, and Technology Transfer. The definition of Green Economy as used in this thesis is the use of market mechanisms to achieve sustainable development. This includes assigning economic value to emission of greenhouse gasses as to incentivize states/companies to limit their emissions. An example of the inclusion of the Green Economy into the global economy is the Kyoto Protocol. Here, developed countries (Annex I Parties) have committed themselves to limiting and or reducing their emissions. These countries have set targets, which have been translated into a maximum amount of emissions per country. Each country is assigned the equivalent of their cap in Emission Units. Countries that do not reach their limit are allowed to sell and trade their “left-over units” to countries that have surpassed their own cap. 5 In theory, this incentivizes countries and companies to limit their
emission, since emitting above their cap would result in an obligation to purchase new emission credits to cover the extra emission.
The Clean Development Mechanism, as defined in article 12 of the Kyoto Protocol, combines the Green Economy and sustainable development, through setting up projects within developing countries (Non- Annex countries) that reduce greenhouse gas emission in order to earn to Certified Emission Credits (CER), each equivalent to 1 ton of CO2.6 These can be traded in order for developed
countries to meet their emission reduction targets.7 In practice, this has meant that industrialized
countries have set up CDM projects in non-annex countries such as Colombia and Peru to offset their own emissions. Besides the goal of reducing emissions in Developing countries, the CDM also aims to spur sustainable development in developing countries.8 All signatory parties to the protocol have
appointed a Designated National Authority (DNA) responsible for approving and crediting CDM proposals in their respective countries. These entities are also responsible for the issuance of CERs. Within this definition, sustainable development means, “to meet the needs of the present without compromising the needs of the future”.9 However, this thesis expands the scope of sustainable
5 UNFCCC. “International Emissions Trading,” UNFCCC, accessed November 17, 2017,
http://unfccc.int/kyoto_protocol/mechanisms/emissions_trading/items/2731.php
6 The project developer has to proof emission reductions and sustainable development occurs through a so
called Project Design Document (PDD). To achieve registration, additionality as to proven. This means that the project developer the project would not have occurred without CDM registration. If the PDD has been
approved CERs will be emitted after monitoring whether the projects have actually led to emission reductions. Monitoring reports also include an assessment on the contribution of the projects has on sustainable
development
7 CDM, What is the CDM. Accessed October 10. http://cdm.unfccc.int/about/index.html
8 UNFCCC, “Kyoto Protocol to the United Nations Framework Convention on Climate Change” (1997), Accessed
November 9, 2016
8 development to also understand securing economic growth while not depleting natural resources as well as including local communities in the process of economic development.
Furthermore, in 2010, the United Nations also stated that the transfer of clean technologies towards developing countries would be one of the goals of the CDM.10 Within technology transfer
the transfer of knowledge from one country to another is also included. Thus it is not limited to the transfer of equipment from country A to B. Technology transfer is important for the economic development of a developing country as foreign technology implemented through a CDM project provides them with a more productive technology, and in the case of CDMs also cleaner
technologies.11 Furthermore, this provides the receiving country with added knowledge that can be
used in future similar situations without having to rely on foreign technology.
Michael Jacobs was one of the first scholar to combine market mechanisms to sustainable development in his book The Green Economy. He combined “Environmental Economics to the political ideology of the Green Movement.12” This contribution is useful since it showed the
importance of attaching economic value to environmental problems. Furthermore, Jacobs identified major problems in combatting climate change. He argued that the global climate was polluted by the already developed countries who used an uneven share of the world resources. As a result, they limited the possibilities of poor countries to use their share of natural resources. Thus, he argues: poor countries should not have to reduce their emission, unless there is a North-South transfer of aid.13 Another author arguing for North-South cooperation to help developing countries achieve
sustainable economic growth is Peter Singer. He outlines several ways to combat climate change, one of which is to help developing countries in developing their economies through monetary aid. His final proposal is that a national emission cap should be installed per country based on its population. This would mean that industrialized countries should have to cut back their emissions while
developing countries can still increase their emission. This gives Southern countries the possibility to use their natural resources and forces developed countries to assist developing countries in
mitigating climate change. If developed countries are not able to decrease their emission to a certain cap, Singer argues for emission trade, which involves both the Global North and South, so that countries that have not used their share of emission can sell their “left-overs” to the polluting
10 Patrick Bayer and Johannes Urpelainen.” External sources of clean technology: Evidence from the Clean
Development Mechanism,” The Review of International Organizations 8.1 (2013): 84, Accessed October 22, 2017. doi:10.1007/s11558-012-9150-0
11 Patrick Bayer and Johannes Urpelainen.” Page 84
12 Movement aimed at conserving and protecting the environment
13 Michael Jacobs, The Green Economy: Environment: Sustainable Development and the Politics of the Future
9 economies.14 The revenues of the emission trade could be used for spurring development in the
Global South. 15 Newell and Paterson support Singer in that they argue that Carbon Markets and
emission trading provide economies with the equipment to combat climate change.16 Thus, the CDM
is an instance of North-South cooperation.
However, problems exist with emission trading and other mechanisms of the Green
Economy, as authors like Böhm, Misozcky and Moog have argued. Since emission trading only applies to developed countries, polluting industries have been relocated to developing countries in which emission caps are non-existent.17 Bachman argues that emission trading furthers global social
inequality and relocates environmental damage towards the Global South. She argues that emission trade fails, since it is not tightly regulated. An alternative she proposes is government regulation on sanctioning polluting industries and taxing emissions.18 One of the most important authors
commenting on the global carbon markets is Larry Lohmann. He emphasizes the neoliberal rhetoric informing the carbon markets; the idea that climate change is an example of market failing and that pricing emissions would solve the market failure. He criticizes the carbon markets for being another mode of capital accumulation for capitalists.19 Other scholars such as Brand, McAfee and Ervine also
criticize the Green Economy for reinforcing inequalities between the Global North and South and its failed promise of achieving sustainable green growth in the South.20 Especially Bachman makes a
convincing point on loopholes in emission trading. Peter Singer’s proposal of emission trading system including both the North and the South could be the solution. However, capping developing
14 Emission trading is the trade of rights to emit polluting gasses. Industries that emit more than they are
allowed to have to buy rights from those industries that emit below the cap set
15 Peter Singer, One World Now: The ethics of globalization (New Haven, Yale U. P, 2002), EBSCO Host.
Accessed November 9, 2016.
16 Peter Newell and Matthew Paterson, Climate Capitalism: Global Warming and the Transformation of the
Global Economy (Cambridge U P, 2010 ) Ebook. Accessed November 11, 2016
17 Steffen Böhm, Maria Ceci Misoczky and Sandra Moog, “Greening Capitalism? A Marxist Critique of Carbon
Markets, ” Organization studies 33.11 (2012): 1617-1638. Accessed November 8, 2016, doi: 10.1177/0170840612463326
18 Heidi Bachram,”Climate Fraud and Carbon Colonialism: the new trade in greenhouse gasses.” Capitalism,
Nature, Socialism 15.4 (2004): 5-20, Accessed November 11, 2016, DOI: 10.1080/1045575042000287299
19 Larry Lohmann, “Algebra of Climate Markets,” Capitalism Nature Socialism 22.4 (2011): 93-116, Accessed
November 11, 2016, DOI: 10.1080/10455752.2011.617507
20 Ulrich Brand, “Green Economy, Green Capitalism and the Imperial Mode of Living: Limits to a Prominent
Strategy, Contours of a Possible New Capitalist Formation, ” Fudan Journal of the Humanities and Social
Sciences 9.1 (2016): 107-121. Accessed November 10, 2016, DOI 10.1007/s40647-015-0095-6;
Kathleen McAfee, “Green economy and carbon markets for conservation and development: a critical view,”
International Environmental Agreements: Politics, Law and Economics 16.3 (2016): 333-353. Accessed
November 2, 2016, DOI 10.1007/s10784-015-9295-4;
Kate Ervine, “Carbon Markets, Debt and Uneven Development,” Third World Quarterly 34.4 (2013): 653-670, Accessed November 9, 2016, DOI: 10.1080/01436597.2013.786288
10 countries’ emissions is a sensitive topic in the South, as they believe that such a cap would limit their ability to grow economically.
Other authors have focused on the possibilities for globalization and free trade to address climate change in the Global South. Already in 1998, Antweiler, Copeland and Taylor researched the impact of free trade on pollution. In their statistical account, they show that an increase in economic openness of 1% leads to a decrease in 1 % in pollution concentration. However, this research focuses merely on pollution concentration per country, not taking into account the accumulated global pollution.21 A study on Latin America in 1999 argues that further trade integration and free trade
leads to environmental degradation. Even if this does not defy the argument that pollution concentration might decline, it does show that environmental degradation increases because of trade integration in Latin America. The most convincing account on the effect of trade liberalization on the environment comes from the hand of Peter Newell. He describes the opportunities and threats of trade liberalization on the environment in Latin America. He argues that through the incorporation of environmental standards into trade agreements, the environment can be protected.22
A lot of emphasis in the literature on the Green Economy has been placed on the functioning of the Clean Development Mechanism.23 Sutter and Parreño, in their quantitative study of examples
of CDMs, assessed whether they met two criteria set in the Kyoto Protocol: “reduce greenhouse gas emissions and contribute to sustainable development in the host country”. They found that the former is achieved while the latter only occurs in 1% of all cases.24 Subbarao and Lloyd have come to
the same conclusion that CDMs have not led to development of local economies.25 However, Dinar,
Rahman and Larson in their extensive and well-written book show that CDMs provide mixed evidence on the value of spurring sustainable development in developing countries and mitigating climate change. They find a mixed pattern of success for reducing emissions while a successful pattern of North-South Cooperation as a result of the CDMs. Furthermore, they argue that CDMs are
21 Werner Antweiler, Brian R. Copeland and M. Scott Taylor, Is Free Trade Good for the Environment,
(Cambridge, National Bureau of Economic Research, 1998)
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.377.2059&rep=rep1&type=pdf
22 Peter Newell, “Trade and Environmental Justice in Latin America,” New Political Economy 12.2 (2007)
237-259. Accessed November 9, 2016. DOI: 10.1080/13563460701302992
Environmental Justice is the idea that the effects of environmental degradation should be spread equally across different countries, races, genders and income classes.
23 Steffen Böhm, Maria Ceci Misoczky and Sandra Moog, “Greening Capitalism?,” 1621
24 Chistoph Sutter and Juan Carlos Parreño, “Does the current Clean Development Mechanism (CDM) deliver its
sustainable development claim? An analysis of officially registered CDM projects,” Climatic Change 84 (2007): 75-90, Accessed November 8, 2016. DOI:10.1007/s10584-007-9269-9
25 Skrikanth Subbarao and Bob Lloyd, “Can the Clean Development Mechanism (CDM) Deliver?,” Energy Policy
11 most successful in countries with a better investment climate, high level of governance and
international trade relations. Overall, their book paints a very positive picture of the effect of CDMs on achieving both mitigation and spurring sustainable development.26 The argument for CDMs is
therefore still ambiguous. While critics have focused on sustainable development goals, Dinar Rahman and Larson focused on the increasing flows of foreign direct investment and the positive results this has had on the host countries. However, they do acknowledge the failed promise of achieving sustainable development while it has succeeded in the transfer of technology and
knowledge to developed countries. Yet only few countries have received CDMs, thus the benefits of the program are limited. That is, CDMs are mainly located in China, India, Mexico and Brazil. Hence, there is a lack of CDMs in the rest of developing world including in South America.27 Designed as a
mechanism to stimulate North-South Cooperation, CDM has had mixed results. However, because of its limited reach, other initiatives that promote North-South Cooperation in countries that do not receive CDMs are needed. This thesis will look at how the CDM has worked in the Colombian and Peruvian setting.
Little scholarly work exists on the effects of the North-South Cooperation in South America and the effect of the Green Economy. The literature that exists on this topic is aimed at Brazil since this is where most of the CDMs have been implemented. Quantitative research of Silva Junior et al showed that CDMs have not yet succeeded in the transfer of clean technologies in Brazil. Through their research of 75 different instances of CDMs within Brazil, they showed that technology transfer has failed to occur.28 Afionis and Stringer provide a different view of North-South Cooperation
through their work on cooperation between the EU and Brazil. Rather than using CDMs to promote cooperation, the EU transfers technology towards Brazil with the condition that it adopts certain environmental standards. However, they argue that these norms artificially lower the competitive advantage Brazil had over Europe and that therefore, economic interests inform the North-South Cooperation29. René Vossenaar also addressed this question. He shows that environmental standards
imposed on Brazilian producers force them to raise their prices, which limits their competitive
26 Ariel Dinar, Donald F. Larson, Shaikh M. Rahman, The Clean Development Mechanism (Cdm): An Early History
Of Unanticipated Outcomes, (Singapore, World Scientific, 2013) Ebsco Host, Accessed November 9, 2016
27Andrew G. Winkelman and Michael R. Moore. “Explaining the differential distribution of Clean Development
Mechanism projects across host countries,” Energy Policy 39.3 (2011): 1132-1143, Accessed November 11, 2016, doi:10.1016/j.enpol.2010.11.036
28 Antônio Costa Silva Junior et al, “Clean Development Mechanism in Brazil: An Instrument for Technology
Transfer and the Promotion of Cleaner Technologies?,” Journal of Cleaner Production 46 (2013): 67-73, Accessed November 9, 2016. https://www.revistargsa.org/rgsa/article/view/331/117
29
Stavros Afionis and Lindsay C. Stringer, “The environment as a strategic priority in the European Union–
Brazil partnership: is the EU behaving as a normative power or soft imperialist?,” International Environmental
12 advantage.30 The literature that does exist on Colombia and Peru with respect to the CDM is aimed at
the economic opportunities it provides for the country. These studies were conducted either before the start of the CDM in 2005 or in its early stages. Vergara Garavito identified several opportunities for economic growth the CDM brought to Colombia.31 Studies on the inclusion of sustainable
development and technology transfer in Peru and Colombia are often large quantitative studies. For instance, Benites Lazaro and Gremaud studied de contribution of CDMs to sustainable development in Brazil, Mexico and Peru. Although their database was extensive, their study does not include a qualitative assessment of the ways sustainable development was achieved. Rather, they look whether terms related to sustainable development were mentioned in the CDM project proposals.32
Such an evaluation is valuable, but not to give a detailed insight into the workings of the CDM.
This thesis will add to the existing literature by assessing the effectiveness of the CDM, in a period where a new agreement (Paris) will replace the current climate agreement (Kyoto) thus also replacing the current Clean Development Mechanism. Furthermore, it will add to the present literature in focusing on South America and in specific on Colombia and Peru. Only little research has been conducted on North-South cooperation in South America and even on the CDM mechanism in Latin America (except for Brazil). Furthermore, it expands on the concepts of Green Economy as developed by Michael Jacobs, and tries to see how one of its mechanisms has been implemented in Colombia and Peru. Finally, the Paris Agreement has only been ratified this year; there is a lack of literature on the prospects for the future. A reflection on how the previous Climate Change agreement has worked in the setting of two developing countries is useful for providing a brief outlook on the future. Unlike Vossenaar, this dissertation will not look into the conditions attached to technology transfer. It will solely look whether transfer occurred and if the technology transferred was considered “clean”. Moreover, this research will build on the work of Dinar, Rahman and Larsen on the quality of CDM projects in spurring sustainable development. By conducting research on the Clean Development Mechanism in Peru and Colombia, this thesis will be able to give an overview on the workings of this mechanism and its effectiveness in achieving its own goals.
30René Vossenaar, “Medidas Ambientales con Efectos Comerciales Sustanciales: La Creación de Barreras y
Oportunidades de Mercado” in Comercio y Ambiente, Temas para Avanzar el Diálogo ed. Mónica Araya (Organization of American States. 2000) 48. Accessed October 22, 2017
31 Judith Cecilia Vergara Garavito, “Oportunidades de crecimiento y desarrollo para las empresas colombianas a
través del Mecanismo de Desarrollo Limpio (MDL),” Revista Producción + Limpia 5:2 (2010): 48-62, Accessed November 19, 2016
32 Lira Luz Benites Lazaro and Amaury Patrick Gremaud. “Contribuição para o desenvolvimento sustentável dos
projetos de Mecanismo de Desenvolvimento Limpo na América Latina,” Revista Organizacões &
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2.1. Methodology
This research will measure the level of sustainable economic development through the amount of successful CDMs set up in Peru and Colombia as well as the amount of technology transfer and capital transfer to Peru and Colombia aimed at mitigating climate change. This can be done through identifying various CDMs and the amount of capital and technology transfer realized. This thesis will evaluate the CDM through various criteria. First, does the CDM lead to emission reduction? Second, does it ensure sustainable development? And third does it allow for the transfer of technology? Firstly, the thesis gives a short quantitative overview of the amount of CDMs implemented in both countries. However, a qualitative assessment of all CDM projects in Colombia and Peru is impossible because a thorough analysis of all projects is difficult. Therefore, this thesis will focus on just two separate instances of CDM in both Colombia and Peru. Through a qualitative study of two projects, this thesis will give an overview of the process of how CDM projects have aimed to achieve the goals set out in the Kyoto Protocol. This includes an overview of the criteria the DNA in both countries handle for approving CDM projects. Furthermore, it will look at the way sustainable development was realized within these projects and whether technology transfer occurred. Finally, the thesis will also look at the problems of the Clean Development Mechanism encountered in Peru and Colombia.
2.2. Historical Overview of Climate Change Mitigation and Action in Latin America
Indigenous and Campesino (Peasant) movements have been at the forefront of environmental action in Latin America. Before any international agreements or national initiatives to ensure a sustainable use of natural resources and the environment were implemented, civil society groups protested against the opening of new mines in Peru, Chile and Brazil.33 Such groups have also protested the
signing of various trade agreements such as the NAFTA and other free trade agreements, afraid of the environmental impact of trade liberalization. These action groups have had mixed success. To a limited extent, large mining projects were halted. However, in recent years, indigenous movements in Peru, Colombia and Brazil have managed to pressure the government into adapting the legal arrangements necessary for protecting forests from being cut down for the implementation of mega mining projects. These legal arrangements have made it possible to implement the climate change mitigation mechanisms such as REDD. This mechanism, financed by the World Bank and the UNFCCC, rewards countries with technological and financial assistance for conserving their forests. This makes
33 Peter Newell, “Trade and Environmental Justice in Latin America,” New Political Economy 12.2 (2007) 239.
14 it more attractive for countries to decide not to use the natural resources present in the soil
underneath forests.34
Furthermore, almost all Latin American countries installed environmental agencies or ministries from the 1980s onwards. For example, Colombia has had a Ministry of Environment with broad powers since 1993.35 However, for a long time the dependence of Latin American countries on
natural resources inhibited the foundation of environmental policies and agencies afraid these would limit the extension of extractive forms of economic development.36 This economic model continues
until today in the region.
An example of the increased importance of the environment in Latin America are the new constitutions of Ecuador and Bolivia. Peasant movement leader Evo Morales and Rafael Correa in Ecuador became presidents and changed their constitution. Among the changes was the inclusion of
buen vivir in its articles. This concept emphasizes “human wellbeing”, which also includes a
conservation of the environment and the inclusion of Rights of Mother Earth. “It rejects the destructive model” of extractivism imposed by developed countries on developing countries. However, this discourse was never converted into reality. Both Correa and Morales have continued their economies’ reliance on extractive practices.37 Rather than diverting the economies from a
reliance on natural resources, these governments have appropriated these resources to support their own populist agenda’s and to finance their social security and infrastructure plans.38 Likewise, other
South America are also on a path of natural resource fueled economic growth. Stimulated by the high commodity process in the early 2000s and China’s demand for raw material, economies in South America remained dependent on market to such an extent that the share of “primary goods” is higher than 50 % in all South American countries in 2011.39
In spite of little institutional efforts to preserve the environment, Latin American countries have played an important role in early cases of international environmental conferences and
34Carlos Antonio Martin Soria Dall’Orso. “La Amazonía en el Futuro de la América del Sur: identificación de los
ejes estratégicos socioambientales para la cooperación Sur-Sur” Caderno CRH 29.3 (2016): 20. Accessed
October 20, 2017 http://dx.doi.org/10.1590/S0103-49792016000400002
35 Gordon J. MacDonald and Marc A. Stern. “Environmental Politics and Policy in Latin America”, in Latin
American Environmental Policy in International Perspective ed Gordon J. MacDonald et al (Boulder: Westview
Press, 1997): 4
36 Stephen P Mumme and Edward Korzetz, ” Democratization, Politics, and Environmental Reform, in Latin
America”, in Latin American Environmental Policy in International Perspective ed Gordon J. MacDonald et al (Boulder: Westview Press, 1997): 41
37 Rebecca Hollender. “Post Growth in the Global South: The Emergence of Alternatives to Development in
Latin America,” Socialism and Democracy 29.1 (2015): 77. Accessed on October 22, 2017, DOI: 10.1080/08854300.2014.998472
38 Ibid. 78
15 agreements. For instance, various Latin American countries participated in the United Nations
Conference on Human Environment in Stockholm in 1972. Furthermore, the region played an important role in the prohibition of CFCs40 during the Vienna Convention for the Protection of the
Ozone Layer. In 1987 the Montreal Protocol was signed which foresaw in “reducing the production of CFCs”. However, various developing countries, among which Argentina, Mexico, Brazil and Venezuela protested against the outcome. Their argument was that developing countries were “penalized” for the environmental destruction developed countries had produced. They argued that the economic cost for developing countries to switch to technologies that did not use CFCs was too high,. Finally, in 1990, after developed countries realized the extent of the problem, they agreed to the transfer of technology towards developing countries. Furthermore, they established a fund to help developing countries to adjust to the new rules that banned the production of CFCs. 41 This protocol forms the
base of subsequent climate change agreements, with the inclusion of differentiated obligations and responsibilities and North-South Cooperation mechanisms such as financial support, and technology transfer.
The most well-known climate change agreement, the Kyoto Protocol, was signed in 1997 and includes the same principles. All of the Latin American countries signed and ratified it in the years following. The South American states belong to the non-Annex B parties, which means that none of these states had to meet any binding targets according to the Kyoto Protocol seeing they were considered as developing and were not to blame for current greenhouse emissions.42 Part of the
Kyoto protocol was the implementation of Green Economy mechanisms such as the carbon market (emission trading) and the Clean Development Mechanism (CDM). Until 2012, 668 CDMs were implemented in Latin America, most of these registered in Mexico, Brazil and Chile.43 It is on these
countries that most reports on Mitigation Strategies in Latin America were written. However, Peru and Colombia also receive large amounts of aid and form the location of many CDMs.
40 In 1974 CFCs were proven to affect the ozen layer which protects the earth from ultraviolet radiation. 41 Gordon J. MacDonald and Daniel L. Nielson. “Conclusion: Latin American Foreign Policy and International
Environmental Regimes, in Latin American Environmental Policy in International Perspective ed Gordon J. MacDonald et al (Boulder: Westview Press, 1997): 265-268
42 UNFCCC, “First steps to a safer future: Introducing The United Nations Framework Convention on Climate
Change,“ Accessed October 22, 2017
43David Watts,; Constanza Albornoz and Andrea Watson. “Clean Development Mechanism (CDM) after the first
commitment period: Assessment of the world's portfolio and the role of Latin America”, Renewable and
Sustainable Energy Reviews 41 (2015): 1180, Accessed October 22, 2017
16
1972
Stockholm
Conference
on Human
Environment
1987
Montreal
Protocol
1992
UNFCCC
1993
Ministry of
Environment
and
Sustainable
Development
created in
Colombia
1997
Kyoto
Protocol
•1998 Peru signs •2000 Colombia signs2005
Kyoto
Protocol
enters
into
force
2005
Start of the
Clean
Development
Mechanism
2008
Ministry of
Environment
created in
Peru
2015
Paris
Agreement
•2016 Peru and Colombia sign17
3. Colombia
Climate change policies and climate change mitigation are relatively new to Colombia. Only in the 1990s, a direction for climate change was founded. Nevertheless, since then Colombia has developed into one of the leading countries within Latin America in this regard. For instance, its Ministry of Environment and Sustainable Development, (MADS in the Spanish acronym), created in 1993, has an extensive mandate. For example, MADS is in charge of designing and controlling the environmental standards that (local) governments have to take into account when planning the territory.
Furthermore, from 2006 onwards, climate change mitigation has actively been included in the National Development Plans (Plan Nacional de Desarrollo). In 2000, Colombia ratified and
implemented the Kyoto Protocol. In 2016, Colombia signed the Paris Agreement and in June 2017, the Colombian parliament ratified it. Furthermore, it has participated in various climate change agreements such as the Montreal Agreement and the Convention on the Biological Diversity. Nevertheless, in their own National Communication to the UNFCCC, Colombia singles international markets out as the most important factor in spurring climate change mitigation rather than the MADS and their ratification of international climate agreements.44 Moreover, it also highlights the
positive role communities, capital markets and technological change play in improving Colombia climate performance. This chapter will look at the functioning of the Clean Development Mechanism in Colombia after which it will zoom in on the Doña Juana Gas-to-energy Landfill Project.
From the implementation of the Clean Development Mechanism until 2017, Colombia has been the host country of 73 CDM projects. This makes Colombia the 13th country in the world with
most CDM registered and the fourth in Latin America.45 According to Benites (2015) Colombia
received as many CDMs as it did partly because of its cooperation with a business group. 46
Furthermore, Colombia has conducted research in order to identify projects that might qualify for the CDM. The DNA for registering and approving CDM projects in Colombia is the Ministry of Environment and Sustainable Development. The responsible office for implementation and
evaluation of CDMs ministry is the Technical Inter-sectoral Committee on Climate Change Mitigation
44 IDEAM, “Tercera Comunicación Nacional De Colombia a La Convención Marco De Las Naciones Unidas Sobre
Cambio Climático (CMNUCC).” (Bogota: PNUD, MADS, 2017)”, Chapter 1, page 25, accessed November 17,
2017.
45 Ibid. Chapter 3, page 57
46 Lira Luz Benites, “A Participacão da America Latina no Mecanismo de Desenvolvimento Limpo,”
18 (CTIMCC, Spanish Acronym).47 The criteria the ministry uses for approving possible CDM projects are
the following:
- It has to comply with sectorial norms
- Be in line with current state policies and planning
- Contribute to the long-term economic and social wellbeing of local communities and the society in general. The project developers have to commit themselves to invest in social works in local communities such as providing basic services, health care, access to water and preservation of the local environment. Furthermore, the project needs to include training of local employees. Finally, the project needs to identify the impact the project has on local communities.
- Implement cleaner production systems add when possible include the transfer of technology48
Graph 1 shows that the majority of CDM projects were registered in 2012. The reason for the sharp decline in the registration of CDMs since 2012 is the low price for CERs on the Carbon Market. One of the criteria for a project to be approved is additionality. This means that a project could not have been realized without the emission of CERs that provide project developers with an extra source of income. This means that if project developers had not received CERs the development of, for instance a hydroelectric power plant, would not have been feasible. Therefore, they require a high CER price to finance the project. However, from a price per CER of 25 euros, the price dropped to almost zero in late 2012. In 2011, the price per CER was around 15 euros, in the same period when most projects applied for registration.49 Another reason why the amount of CDMs registered
increased was the attention the CDM received in the Colombian national development plan of 2006-2010 and the subsequent one for 2006-2010-2014.50
47 Oscar Coto and Liana Morera. Cambio Climático: Capacidades Técnicas Existentes y Actividades relacionadas
con el Mecanismo de Desarrollo Limpio (MDL) en los Países de América Latina y el Caribe (OLADE,ACLI, 2004),
17.
48 Ministerio de Ambiente, Vivienda y Desarrollo Territorial. “Resolución Numero 453.” Diario Oficial No 45.539
Published April 24, 2004. Page 14. Accessed December 11, 2017
49 UNFCCC, “Database for PAs and PoAs, last updated 30 October 2017, accessed November 15, 2017,
http://cdm.unfccc.int/
19 Most of the CDM projects in Colombia are in the renewable energy and waste management sector with 24 and 26 projects respectively. In total, the 73 projects resulted in an expected
reduction of 8.546.817 tons of CO2. Not all registered projects resulted in the issuance of CER.
However, the projects that did receive CERs amounted to 11.303.491,00 CERs available for sale. Even though projects in the waste management sector resulted in the highest amount of reduction, it was in the transport sector where the largest reductions were achieved per project.
Although figures on emission reductions are clear and easy to find, it is difficult to quantify how/if sustainable development and technology transfer was achieved in the regions were CDMs were implemented. Nevertheless, Bayer and Urpelainen calculated that in all projects implemented from 2005-2010 in Colombia, 12% of renewable energy projects and 46% for other projects featured technology transfer.
Of all CDM projects in Colombia, 23 were implemented without partnering with a country pertaining to Annex I of the United Nations Framework Convention on Climate Change (UNFCCC). This automatically rules out the possibility of technology transfer from a developed country. Even within some projects that were registered as bilateral, the Annex I partner was solely involved in buying the CERs. Therefore, involvement of an Annex I country in financing, formulation and implementation of the project did not occur in these cases.51
51 Sonia Esperanza Sanabria Aguirre and Enrique Hurtado Aguirre. “Emprendimiento verde en Colombia: el caso
del mecanismo de desarrollo limpio (MDL),” Entramado 9.1 (2013) 49, Accessed November 23, 2017,
4 2 6 7 6 13 18 6 3 4 2 1 0 2 4 6 8 10 12 14 16 18 20 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
20 The implementation of CDMs in Colombia encountered several bottlenecks. First and one of the most important ones is the lack of continuation in the Designated National Authority. After each presidential election the top civil servants are replaced, endangering continuity of policies. Secondly, the low priority given to CDMs in Colombia results in low pay for employees of the DNA.
Unfortunately, this translates into a “young and inexperienced staff.”52 Thirdly, because of a lack of
technological knowledge, the implementation of new technologies remains problematic. New technologies could lead to higher emission reductions and contribute positively to the development of communities.
One of the sectors that encounters many difficulties is the landfill sector. Among the problems is the lack of recycling, leading to a lower production of landfill gas that could be used for energy generation. Moreover, the technology imported for waste management projects are often not adapted to the local situation. Finally, converting landfill gasses into electricity is economically not interesting without CDM registration. Low CER prices and uncertainty about the continuity of the
52 Elizabeth Lokey, Renewable Energy, Project Development under the Clean Development Mechanism: a Guide
for Latin America (London, Earthscan, 2009), 190
Table 1: CDM Projects Colombia Project Type # Project Average potential
reductions per project Potential annual reductions (CO2 tons) Average CERs issued per project
Total amount of CERs issued Renewable Energies 24 89.562,00 2.149.588,00 63.835,00 1.468.201,00 Energy efficiency in industrial processes 10 111.434,00 1.114.344,00 81.636,00 816.367,00 Transport 6 175.276,00 1.051.658,00 91.735,00 550.409,00 Waste Management 26 151.011,00 4.077.306,00 229.322,00 5.962.381,00 Afforestation 7 69.472,00 486.306,00 358.019,00 2.506.133,00 73 8.546.817,00 11.303.491,00
21 CDM mechanism endangered the implementation of waste management projects.53 Therefore, the
next section will look at one of the instances of a CDM project in the waste management sector.
3.1. Doña Juana Landfill Gas-to-Energy Project
The Doña Juana Landfill Gas-to-Energy Project is located within the capital of Colombia, Bogota. The CDM project involves the treatment, capturing and flaring of methane from the landfill Doña Juana, thus generating energy for the electricity grid. The landfill Doña Juana is in operation since 1988 and is the site where municipal waste from the capital (approximately 7 million inhabitants) is collected. Before the landfill project applied for CDM status, Doña Juana functioned as a regular landfill. It collected all waste and captured, and treated all leachate. The gas created by the landfill and the leachate went untreated and escaped through “vertical wells” from the site. In 2007, the Special Administrative Unit for Public Services (UAESP) of Colombia published a tender for a special
concession for the “collection, treatment and use of the landfill gas generated by the degradation of the waste disposed at the Doña Juana Landfill” in a separate part of the landfill. The company Biogas Doña Juana won the tender. Biogas Doña Juana is a consortium between a French (GRS Valtech) and a Spanish company (Gas Natural SDG). Furthermore, Proactiva Colombia, part of the Spanish
company Proactiva, was involved. They invested a total of 25 million dollars into the project. The investment will be earned back through the sale of CERs and electricity to the grid.
In the Project Design Document (PDD) it was made clear that without CDM status, the project would not have been viable. Solely the sale of electricity to the grid would not have been enough to cover the investment. The price of electricity in Colombia was set around 145 Colombian Pesos per kWh (58 USD/MWh). This price could not cover the expenses made by Biogas Doña Juana. With an expected price for the issued CERs of USD$16,- until 2012 and USD$8,- after 2012, the investment could be earned back. The Internal Rate of Return (IRR)54 for this project without CERs was zero. The
estimated IRR including the sale of CERs rose to 16. Thus, the only way this project was viable
through CDM registration and the issuance of CER. However, this was put in peril through the drop in CER prices in 2012. To secure financing for the project, the Biogas Doña Juana Company participated in a tender from the Nordic Environment Finance Cooperation for “vulnerable CDM projects”. The
53 Sonia Esperanza Sanabria Aguirre and Enrique Hurtado Aguirre. “Emprendimiento verde en Colombia: el caso
del mecanismo de desarrollo limpio (MDL),” Entramado 9.1 (2013) 52-53, Accessed November 23, 2017,
54 The IRR is used to measure the “profitability of potential investments”. The higher the rate, the more
attractive a project is. 10% is the minimum number to make a prject viable.
Johannes Alexeew et al. “An Analysis of the Relationship between the Additionality of CDM projects and their Contribution to Sustainable Development.” International Environmental Agreement: Politics, Law and
Economics 10.3 (2010): 238. Accessed December 11, 2017. https://doi-org.ezproxy.leidenuniv.nl:2443/10.1007/s10784-010-9121-y
22 Nordic Environment Finance Cooperation agreed to buy 5.39 million CERs for a set price, ensuring the future of the project.55
The CDM project involves the “installation of enhanced landfill gas extraction and flaring
equipment, a landfill gas pre-treatment station, landfill gas reciprocating engines and {…} several power plants.” Overall, instead of collecting the landfill gas generated at the site, the gas will now be
combusted. The power plants fueled by the landfill gas could generate up to 32 MW. Energy sold from these plants can be used to supplement revenues from CER sales. However, not all power plants have been installed. Only one of the four projected power plants has been installed. This means that current energy generation is limited to only 1.6 MW. Other plants are projected to be completed in 2018 and 2019.56
According to the PDD the most important contribution to climate change mitigation is reduction of emissions of methane, a greenhouse gas that absorbs heat 25 times more than CO2.
Through flaring of the methane gas produced in the landfill, the methane “oxidizes” into the less polluting greenhouse gas CO2. It is this reduction in emission that is translated into an expected total
reduction of 1 million tons of CO2 per year. The DNA monitored progress every 6 months and based
on these reports CERs are issued.
Reductions have been lower than expected due to several technical problems for short periods. For example, a landslide in the zone where the CDM project takes place shut down operations. In the monitoring period of April 1 until September 30, it was expected that the
installation would achieve a reduction of 484.678 tons of CO2. However, only 199.740 was achieved,
which accounts for a difference of 284.947. In total, the reductions that were achieved have been translated by the Colombian DNA into the issuance of 4.6 million CERs until now. This is the
equivalent of a reduction of 4.6 million tons of CO2 since 2008. CERs have been issued continuously
for 12 times now. It is expected that the project will continue to reduce emissions until after 2029. That is the length of the original contract between the Biogas Doña Juana and UAESP. However, landfill gas will continue to be captured and flared after 2029.57
55 Pocacito, “Doña Juana Landfill Gas-to-Energy,” Centre for European Policy Studies, page 2 accessed
November 28, 2017, http://pocacito.eu/sites/default/files/DonaJuana_Bogota.pdf
56 CDM. “Monitoring Report Doña Juana Landfill Gas-to-Energy Project.”UNFCCC, published November 7, 2017.
Page 13. Accessed December 11, 2017.
http://cdm.unfccc.int/filestorage/I/0/X/I0X1UQVY3ZRDA5SK9JOL2CWG6E7FMT/PDD_form05%20BGDJ%20v5.p df?t=cDJ8cDB0OHJofDAKMiSg5b1PHdZIG8t4B_YS
57 CDM. ”Project Design Document: Doña Juana Landfill Gas-to Energy project version 05.0.” UNFCCC,
published March 22, 2015. Page 73. Accessed December 11, 2017.
http://cdm.unfccc.int/filestorage/I/0/X/I0X1UQVY3ZRDA5SK9JOL2CWG6E7FMT/PDD_form05%20BGDJ%20v5.p df?t=cDJ8cDB0OHJofDAKMiSg5b1PHdZIG8t4B_YS
23 The landslide on October 2, 2015, resulted in the disconnection of several pipes, leading to less landfill gas being collected. According to the monitoring reports published by the project developers, this landslide was “slight”, and received little attention in the monitoring reports.58
However, the Environmental Authority for the region Cundinamarca (Bogota is the capital of Cundinamarca), CAR, has started a lawsuit against the operator UAESP of the landfill. According to the CAR, the waste has been disposed on a too large area. Furthermore, a large quantity of leachate was found in the zones used for the landfill gas-to-energy project. Finally, locals are complaining about an increase in the presence of flies and other insects as well as rise in the presence of odors in the region.59 This has even led to protest of the local population in favor of shutting down Doña
Juana. Even though Biogas Doña Juana is not responsible for the deposits of waste unto the site, this is a negative sign of the impact of the landfill on the local community.
3.1.1. Sustainable Development
As part of the goals set by the CDM authority in Colombia, the Doña Juana project also contributes to sustainable development of the Bogota region. In the project design, the developers stated that this project would improve health and “quality of life” near the landfill. Furthermore, in the construction and operation of the flaring system and generators, local population is benefitted through the availability of jobs. Direct employment will be generated through the operation of the flaring systems during its estimated life span of 21 years. In the PDD for the first crediting period of 2009-2016, the following benefits for the community are listed. UAESP will receive 24% of the CERs generated and 2% of the energy sold in the future. 60 Of the revenues transferred to UAESP 40% will go to
community projects, 30% will go to the promoting of recycling in Bogota and the final 30% is reserved for developing a waste management master plan for Bogota. Finally, through flaring of methane, odors will be removed from the air, benefitting the neighborhood. However, have these ambitions been translated into real sustainable development?
According to the monitoring reports, written by the project participants themselves, the CDM project has resulted in 77 construction jobs during the first phase. 61 Furthermore, for oversight and
control 17 workers are employed permanently. It is expected that once the power plants have been built and are fully operating, permanent employment will increase to 30 workers. According to the
58 CDM. “Monitoring Report Doña Juana Landfill Gas-to-Energy Project.”UNFCCC, published November 7, 2017.
Page 15. Accessed December 11, 2017.
59 El Tiempo. “Claves sobre el Problema del Relleno Sanitario y de Basuras Doña Juana en Bogota.” El Tiempo.
Published August 16, 2017. Accessed December 11, 2017 http://www.eltiempo.com/bogota/claves-sobre-el-problema-del-relleno-sanitario-y-de-basuras-dona-juana-en-bogota-120264
60 Pocacito, page 3
24 Social Development Tool from the UNFCCC, 50% of the workers at the project originate from the neighborhoods of the landfill itself.
Finally, until 2016 the municipality of Bogota received 2.5 million dollars from the project to fund community projects. This has benefitted local communities through the financing of social projects such as construction of parks, water and waste management projects, and sports and recreation centers. 62 It is difficult to tell if this sum is the equivalent of 24% of CERs sold, as
information on the price of CERs sold by Biogas Doña Juana is not publicly available. Nevertheless, with the money generated by Doña Juana the local community has benefitted. This would not have been possible without the CDM registration, since the added revenue of CERs made the project viable.
3.1.2. Technology Transfer
Besides the goal of sustainable development, technology transfer was also included in the PDD. According to the developers, the Doña Juana gas-to-energy project was the first of its kind in Colombia. Generation of electricity through Landfill gas was new to Colombia. The company implementing the technology will:
“Support efforts aimed at […] the dissemination of design and operational experience gained at Doña Juana landfill for possible use throughout the region and or country.”
Thus, the company is not prohibiting the diffusion of the design towards other landfill sites in Colombia. Therefore, this case of technology transfer can be considered successful as the
dissemination of knowledge and technology acquired at the Doña Juana can be applied at other sites, thereby improving local development and energy generation.
The technology used in the project was produced within Colombia based on a foreign design, thus being a successful case of technology transfer from the developed world.63 This was necessary
on the side of the project developer, as without transferring this new technology to Colombia, such large emission reductions would not have been possible. This also follows from Carpenter’s study on the relation between project size and the occurrence of technology transfer. She found a positive relation between project size and the occurrence of technology transfer.64 There is an incentive for
62 Pocacito, page 3
63 CDM, “Clean Development Mechanism Sustainable Development co-Benefits Description Report, Doña Juana
landfill gas-to-energy project,“ UNFCCC, published February 28, 2017. Page 7, accessed November 28, 2017
64 Laura M. Carpenter. “The role of intellectual property rights and absorptive capacity in international clean
25 foreign companies to transfer technology: as such technology leads to higher reductions that
subsequently lead to the issuance of more CERs.
Lastly, the implementation of this project has also led to the development of job-related skills under workers. They have received regular training on the operation of the new technologies.
Working at the first Colombian site where landfill gas flaring occurs, results in larger possibilities on the job market. Finally, universities and research centers have visited the site to learn from the technologies implemented at the landfill.65
In the Doña Juana local manufacturers build the necessary technology for flaring, based on foreign (French) design. In spite of the claims that technology transfer would occur, it cannot be determined whether technology employed in Doña Juana has been used in other landfill sites in Colombia. Several CDM projects have been implemented in landfill sites in Colombia, of which nine have used the same methodology for reducing emissions as Doña Juana. This means that in nine other projects, reductions are achieved through flaring of landfill gas from which can be expected they use similar technology. If technology transfer and capacitation local employees had been successful in the Doña Juana project, a few would have made use of this expertise now present in Colombia. Since, local manufacturers built the flaring systems for the Doña Juana project.
Nevertheless, these nine other projects continue to import flaring installations, mainly from Germany (Hofstetter Umwelttechnik). For example, the project “Los Pocitos Landfillgas Utilization Project” used comparable flaring systems as at Doña Juana. Even though similar technology and expertise was required, the technology was imported again from Germany (Hofstetter).66 The project
“Proactiva Presidente Landfill gas-to-energy project” has the exact same goal as Doña Juana.
However, they state that none of the projects currently installed in Colombia have technology similar or adequate for the specific conditions on their Landfill site.67 This implies that the technology
transfer, which occurred at Doña Juana, has not been successful. Even though one of the criteria of technology transfer was met (increasing productivity through the implementation of foreign technologies), the transfer has only been superficial. One explanation for the lack of use of Colombian suppliers of flaring techniques in subsequent landfill gas projects is that the Colombian manufacturer of the flaring systems at Doña Juana did not gain the expertise necessary to copy flaring systems unto other project sites. A second possibility is that they successfully obtained the
65CDM. “Co-benefits Description Report Doña Juana”. Page 5
66 CDM. “Los Pocitos Landfill Gas Utilization Project version 2.3.” UNFCCC. Published April 9, 2013. Page 19.
Accessed December 12, 2017
67 CDM. “Proactiva Presidente Landfill Gas to Energy Project version 3.” UNFCCC. Published October 10, 2012.
26 technological knowledge to produce flaring systems, but that their solutions were not competitive. In both situations, technology transfer has not been successful. Even though technology transfer occurred for Doña Juana, the promise included in the PDD that this technology could be diffused throughout Colombia has not been fulfilled. Unfortunately, monitoring of the Doña Juana Project does not involve an assessment of whether technology transfer has occurred successfully. This is a major caveat in the process of the CDM facility.
27
4. Peru
Peru has only recently begun to promote climate change mitigation actively. In 2008, Peru passed a decree (nr. 1002) that not only promotes renewable energy legislation but also sets a goal for renewable energy generation of 5% of the total energy matrix.68 Furthermore, more money was
directed at research and development of new technologies. At the same time, the Ministry of
Environment was created in Peru, being promoted from a separate agency at the Ministry of Housing and Development to a full-fledged ministry.69 In spite of the lack of an environmental ministry in Peru
at the time, it signed the Kyoto Protocol in 1998 and ratified it in 2002. In 2016, Peru also signed and ratified the Paris Agreement. Since Peru signed the Kyoto Protocol and is non-annex member to the UNFCCC, it is eligible to receive Clean Development Mechanism projects. The following chapter will look at the criteria the local DNA applies for approving CDM projects. Furthermore, it will zoom in one the status of CDM projects in Peru and finally it will take a close look at the Poechos I project.
Different from Colombia, the responsibility or the CDM is divided between two institutions. From 2005 until 2008, regulation was the responsibility of the CONAM (National Council for the
Environment). With the creation of the Ministry of Environment, these tasks were passed onto the
new ministry.70 Promotion of the CDM lies with FONAM (National Environmental Fund). FONAM’s job
is to advice parties in the steps they have to take to apply for CDM status. FONAM present lists of possible projects at international congresses. They are the commission for identifying possible projects eligible for CDM status. Furthermore, they help writing the first version of the PDDs. Although they do not charge for this service, according to Elizabeth Lokey in her book on CDM projects in Latin America, FONAM hopes to receive CERs as payment for their services.71 FONAM has
been successful and has even been a model for other Latin American countries.72 Because of their
role in promoting CDMs in Peru, Peru is the fifth country in Latin America with most CDM projects registered.
In contrast to the Colombian process, CONAM visits projects sites to determine whether a CDM project in that location would lead to sustainable development for the local community. 73
During this visit, the reporter talks to local authorities and communities. The reporter also identifies
68 Peru only includes small-scale hydroelectric energy projects (<20 MW) in the definition of renewable energy 69 Elizabeth Lokey, Renewable Energy, Project Development under the Clean Development Mechanism: a Guide
for Latin America (London, Earthscan, 2009), 281
70 Benites Lazaro and Gremaud, Page 57 71 Ibid. Page 282
72 Ibid page 283
28 certain activities that need to be executed by the project developer to achieve sustainable
development in the communities. Apart from determining whether the project contributes to local development, CONAM also applies other criteria for approving CDM projects. These are:
- The project has to be technologically viable, which has to be demonstrated through experience at a national or international level
- It has to comply with all legal standards
- It has to be environmentally and sociably responsible. Local communities will be consulted by CONAM and have to consent to the implementation of the project. 74
Because of these criteria, Peru registers high levels of sustainable development achieved because of a CDM project. For instance, in 73% of all projects, jobs are created for the local population.
Furthermore, in 59% of all projects, local institutions are strengthened. This entails the improvement of local education and improving access to education as well as generating more income for local municipalities. Finally, because of the large share of Renewable Energy projects in the total amount of project, energy security for local communities was increased (see Table 2). 75
In total 68 Peruvian projects have been approved and registered at the UNFCCC. Most of these, as in Colombia, were registered in 2012. Next to high CER prices in the years previous to 2012, project developers were uncertain about the continuity of the CDM after 2012. The first commitment
74 MINAM. Guia Practica para Desarrolladores de Proyectos MDL (Lima, 2011), Page 77. 75 Benites Lazaro and Gremaud. Page 65
3 1 5 8 5 2 4 36 3 0 0 1 0 0 5 10 15 20 25 30 35 40 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
29 period of the Kyoto protocol would terminate in 2012, while it was not yet renewed. This uncertainty led to many developers registering their project prior to or in 2012.76 When the CDM was renewed at
the Doha amendment, many projects were already registered. The low CER prices and the
oversaturation of the market with CDM projects led to a sharp decrease in CDM project registration.
Of all projects, 57 projects were located in the renewable energy sector, while only few projects were registered in other sectors. This is the result of the large potential for renewable energies in Peru. Even though the share of renewable energy in the energy matrix was already high before the start of the CDM (through the use of hydroelectricity), prices for renewable energies were high. As a result, project developers applied for CDM registration in order to cover expenses through the sale of CER. The majority of the renewable energy projects (44 projects) involve the generation of hydroelectric power. This is the result of various factors; Firstly, in the guide the Peruvian Ministry provides for developers of CDM projects, hydroelectricity is highlighted as being an attractive investment opportunity. The guide gives an overview of the financial attractiveness, easiness of implementation, probability of CER issuance and the level of complexity of the CDM procedure. For hydroelectricity the financial return is high, projects are easy to implement, the likeliness of CER issuance is high and the complexity of the CDM application procedure is moderate.77 On the
contrary, other renewable energy projects are classified as complex with moderate financial attractiveness and probability of CER issuance.
Secondly, hydroelectric technology was already widespread in Peru before the start of the CDM. This becomes evident when looking at the amount of technology transfer that occurred in these projects (just 30% of all projects).78 Prices in 2009 for energy from small hydroelectric power
plants were at just 60US$ per MWh, while the price for solar energy was around 221 US$ per MWh. This did drop to 119 US$ per MWh in 2011. However, in comparison to the price of hydropower (53,6US$/MW), this is still far higher.79 In short, the availability of hydroelectric technology and the
low prices for this kind of electricity resulted in the development of many hydroelectric CDM projects.
76 Lira Luz Benites. Page 12
77 MINAM, Guia Practica. Page 101 78 Benites and Gremaud, page 65
