UN rejects call to slash CDM fees, opens regional centres

by Susanna Twidale | Reuters Point Carbon
Monday, 29 July 2013 16:30 GMT

A trader displays new Congolese currency bills in the Democratic Republic of Congo's capital Kinshasa, July 3, 2012. REUTERS/Jonny Hogg

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LONDON, July 29 (Reuters Point Carbon) – The U.N. last week rejected pleas from project developers to slash fees for emission reduction projects registered under the Clean Development Mechanism (CDM) and instead vowed to plough cash into regional centres to boost the number of schemes in some of the world’s poorest countries.

At a meeting held in Bonn, Germany last week the CDM’s Executive Board opted not to recommend waiving administration fees for project developers while market prices for carbon credits remain below their generation costs.

The CDM allows investors in emission reduction projects located in poor nations to earn carbon credits that governments and companies can use to offset emissions, making it cheaper to meet carbon curbs set by the U.N. and EU.

The price of the credits has plummeted to around 50 cents from over 20 euros five years ago, nearly bankrupting companies that invested in projects, after countries failed in 2009 to agree a global climate pact that would have triggered demand for credits.

Project developers that request more than 20,000 carbon credits a year must continue to pay 20 cents per unit, more than a third of their current value, after the board said scrapping fees would only lead to small savings for investors but would have a huge impact on U.N. revenues.

The CDM administrator has amassed a cash pile exceeding $216 million from collecting fees, but the U.N.’s climate arm said the revenue is vital to ensuring it retains the staff and systems needed when demand for carbon credits returns.

Despite low demand for credits, the board will use some of this cash to pay for regional centres to develop projects in poor countries that have so far failed to attract significant investment through scheme.

REGIONAL CENTRES

The board last week agreed to fund two more centres, where staff help guide project developers though the process of registering under the scheme, in addition to the three already open in Togo, Uganda and Grenada.

“The choice was to drop anchor or stay the course. We ultimately decided to take this time to maintain and improve the CDM and seek opportunities where they might be found,” said Executive Board Chair Peer Stiansen.

A fourth centre is due to open in Bogota, Colombia in August with a fifth in planned for Manila, Philippines later in the year.

U.N. documents published alongside last week’s meeting agenda show the board expects to spend around $800,000 on staff and office costs for the five centres by the end of the year.

The countries targeted currently all host less than 75 projects each registered under the CDM out of more than 7,000 approved schemes.

Investors in projects located in the world’s Least Developed Countries, including Togo and Uganda, are exempt from paying the U.N. admin fees.

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