Money for methane: Success Stories of Carbon finance

The 2010 and 2011 are two remarkable years for the SNV Netherlands Development Organisation as well as its national partners in Nepal and Cambodia, as because, the countries receive long pending carbon credits issuance and successfully registered its pro-poor domestic biogas based emission reduction projects. These successes have ensured a steady flow of carbon revenue to the biogas projects, which is crucial for financial sustainability of these programmes. The official communiqués on this success is depicted below.

Cambodia

The National Biodigester Programme (NBP) from Cambodia received a certificate representing its first issue of 34,112 Gold Standard VERs at the international workshop held in November 2011 in Indonesia. This was the result of the first NBP monitoring report covering the period of May 2009 till August 2010. The average annual emission reduction per biodigester was determined at 4.2 ton CO2 equivalent.

The NBP, which is a joint venture between the Cambodian Ministry of Agriculture, Forestry and Fisheries (MAFF) and SNV, initiated carbon finance activities in 2005. At that time, obtaining CERs was unattractive, as only VERs allowed a combination of fuel switch and methane capture in the emission reduction calculation, as well as no thermal ceiling on the power output of the bundled biodigesters. Since 2007, NBP has an important agreement with the Hivos Climate Fund on the sale of VERs generated by the programme.

The process of acquiring the first carbon credits was time-consuming, however the 2nd monitoring report, planned for March 2012, with a total of about 60,000 VERs, is expected to go smoother and faster. It is very important for NBP to continue carbon finance activities to cover long-term financing of the programme costs. With the present VER market condition, NBP expects to have all programme costs, including subsidy, covered out of carbon revenues when 45,000 biodigesters are in operation. This can be achieved by 2018 if the present plant construction figures are maintained. The 15,000th installed plant mark was achieved on 20th of February this year.

The success story of Nepal:

The United Nations Framework Convention on Climate Change (UNFCCC) has issued a total of 92,278 carbon credits for the Nepalese Biogas Support Programme (BSP) in the 2nd half of 2011. The credits (Certified Emission Reductions; CERs) cover 19,396 biogas plants installed between November 2003 and April 2005 and for emission reduction period of August 2004 to July 2006.

BSP-Nepal, the programme implementing agency and other partners faced several hurdles in the process of obtaining the UNFCCC certified carbon credits. With the assistance of SNV and others (e.g. KfW and World Bank), for example in developing new CDM methodologies, they overcame these obstacles and can now reap the benefits by mainstreaming carbon projects into their biogas programme.

Two more bundled biogas projects were registered in December 2011, covering 40,602 biogas plants, as CDM projects. The CER issuance of these projects is expected for 2013. The carbon credits certified by UNFCCC could provide annual carbon revenue of up to US$ 5 million by the year 2014/15. This amount meets the current level annual expenditure of the programme, including the subsidy component. The financial gap in programme implementation would therefore be bridged and make the programme financially self-reliant, ensuring a successful continuation even without donor and government funding.

The Alternative Energy Promotion Centre (AEPC) run Nepal’s bio-gas programme has enabled the Nepali rural households to use clean cooking fuel, and eventually reduce greenhouse gas (GHG) emissions by displacing the conventional use of fuel wood for cooking. Over 230,000 bio-gas plants installed through the BSP-N programme across the country have replaced firewood, providing cleaner energy, improved health among women, reduced deforestation and contributed to job creation. An Emission Reduction Purchase Agreement (ERPA) was signed by AEPC and the World Bank for trading of the Emission Reductions (ERs) from the two CDM Projects for 7 years. An amount of around USD 1.98 million, generated from the carbon credit for up to July 2009, has already been paid by the World Bank. Currently, a Programme of Activities – PoA for registration of biogas plants to be constructed with BSP support in the next 28 years.

Keshav C Das
Advisor, Climate Finance, SNV Netherlands Development Organisation

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