India’s plans for a domestic energy efficiency cap-and-trade scheme have raised concerns over how the market for Clean Development Mechanism (CDM) projects will be affected.
There are concerns the scheme could potentially reduce the incentive for Indian utilities to put forward energy efficiency projects under the CDM, if the credits generated from the new scheme are deemed more valuable.
However, Alessandro Vitelli, the director of carbon research provider IDEAcarbon, doesn’t think the new scheme will impact drastically on the burgeoning CDM market in India. “Relatively few utilities were shopping around for CDM projects in the energy efficiency sector in the first place, so it doesn’t change the game for CDM,” he says. “Energy efficiency is not a sector where many CDM projects usually take place, so I still see there being a lot of scope for CDM in India in other areas such as renewables.”
However, a potential overlap might arise once companies reach the required energy efficiency benchmark and are faced with the choice of what to do with any extra savings, according to Vitelli.
Further concerns have been raised over whether Indian companies will have the resources to dedicate to CDM projects once they have spent time and money achieving their legally binding national efficiency saving standard.