Identifying and overcoming barriers to renewable energy Clean Development Mechanism projects in Latin America

The Clean Development Mechanism (CDM) allows Annex I countries that have ratified the Kyoto Protocol and must meet greenhouse gas reduction targets to do so in part by purchasing emission reductions from projects registered with the United Nations Framework Convention on Climate Change (UNFCCC) in developing countries. These projects, in theory, result in additional emission reductions that would not have occurred otherwise because they rely on the CDM revenues for their existence. The goals of the CDM are to reduce greenhouse gas emissions in the most economical way possible and promote sustainable development. Thus far, the bulk of these emission reductions come from industrial gas mitigation projects that many skeptics claim do not promote sustainable development. Also, the concentration of factories suitable for these types of mitigation projects are not evenly distributed so not every country has the potential to benefit from these CDM revenues.;Non-hydro renewable energy projects, on the other hand, do almost always help promote sustainable development that would not otherwise occur. In most developing countries future electrical demand growth is currently being filled by fossil fuel or large hydro resources. Non-large hydro renewable energy development typically does not occur in a business-as-usual situation, but can provide a sustainable energy future. In this way, promoting (non-large hydro) renewable energy CDM projects helps achieve the CDM goal of sustainable development. Also, these projects can be ubiquitously distributed since renewable energy resources of different types are spread throughout the globe. However, thus far, these projects take a minority position to the larger, industrial gas mitigation projects.;For successful renewable energy CDM project registration and emission reduction issuance into the future, the project must overcome a variety of political, economic, social, and technical barriers. This dissertation seeks to make these barriers to renewable energy projects and their equitable distribution in Latin American more well-known as a first step towards better achieving the CDM goal of promoting sustainable development. Some solutions are presented, but this section will be limited as a full discussion of these solutions merits another dissertation altogether.;The author researched these barriers not only by reviewing the current literature available, electrical background for each country, and renewable energy legislation in each country, but also by visiting 12 Latin American countries and conducting interviews with project developers, governmental and non-governmental organization representatives, and investors. She also visited 15 project sites during her travels to observe first-hand the barriers to project implementation.;The results of her research are organized by country and barrier categories, which include technical, CDM bureaucratic, informational, institutional, social, and small-scale. The two most important barriers to project development are politically and bureaucratically-related. The first major barrier to CDM project entry in a given country is related to the openness of its electrical sector. Fully privatized electrical sectors are more receptive to Independent Power Producer (IPP) participation. This IPP involvement is necessary because state-run utilities have little incentive to and in some cases cannot by law implement CDM projects. State-run utilities are bound to develop the least-cost project, which, by definition, cannot be a CDM project since it must rely on the emission reduction revenues for its existence. These emission reduction revenues are so new and risky since they must be successfully registered with the UNFCCC that they are not incorporated in state utility least-cost planning processes. Therefore, countries with open electrical sectors that allow IPPs to develop CDM projects typically have the most CDM renewable energy development.;The second major CDM barrier is that countries with strong renewable energy incentives or mandates are at a disadvantage since for CDM registration, projects must be additional to what would have occurred otherwise. If a project that is applying for CDM registration helps fill a renewable energy mandate, then its regulatory additionality is put in question. Likewise, if a feed-in tariff for renewable energy makes a project financial viable, then its financial additionality is negated. The CDM Executive Board's silence on this important issue of additionality has created a perverse incentive for developing countries to do nothing to address climate change. These and a host of other types of barriers are explained in this dissertation.