Bioenergy and the CDM in the Emerging Market for Carbon Credits

This paper analyses the eligibility of different types of biomass energy projects in developing countries for funding under the Kyoto Protocol's Clean Development Mechanism and related funds. Specifically, GHG emission reductions through the replacement of non-renewable types of biomass with renewable energy, or the improvement of the efficiency of energy systems based on non-renewable biomass, is discussed in more detail, as it is currently difficult if not impossible for these to qualify as CDM projects under current rules. These problems are caused by the categorical exclusion of land-use from the CDM (with the exception of afforestation and reforestation projects). The paper offers some possible solutions for both small-scale and large-scale CDM projects. These limitations hold for a number of carbon funds. The paper covers of the major funds operated by the World Bank and that are already operational, to point out differences between existing funds in order to identify the best opportunities for different biomass sources and technologies. This systematic, comparative analysis covers the characteristics of the different funds in terms of eligible technologies, geographical foci, and size (targets and completed and ongoing transactions, CO₂ equivalents, project asset values). To provide the context for the analysis of the carbon funds, the regulatory drivers and frameworks influencing the demand side of the market are discussed. This first of its kind analysis for the specifics of the carbon market regarding bioenergy enables decision makers and project managers active or planning to become active in the area, to identify and target the most promising funds for their specific purposes.