Statutory body announces tariffs for CDM projects - By Conrad Prabhu - MUSCAT -- The Oman Government's formal establishment of a Designated National Authority (DNA) augurs well for the strong growth of energy efficient and renewable energy projects in the Sultanate, according to an expert representing one of world's largest providers of climate change services. Dr Inderjeet Singh, a sustainability specialist at global professional services firm PricewaterhouseCoopers (PwC), and Mohammed Salem, PwC Advisory Leader in Oman, say the long-awaited decision is set to impart new impetus to investments in green energy and environmentally responsible technologies falling within the ambit of the Kyoto Protocol's Clean Development Mechanism (CDM).
The DNA is a statutory body that must certify all candidate CDM projects before they are considered for registration as CDM initiatives under the UN Framework Convention on Climate Change (UNFCCC). Approved CDM projects earn Certified Emission Reduction (CER) credits that have since spawned the growth of a multibillion dollar carbon market. These CERs can be traded and sold, and used by industrialised countries to meet a part of their emission reduction targets under the Kyoto Protocol. Last month, the government named the Directorate-General of Climate Affairs (Ministry of Environment and Climate Affairs) as the statutory body with responsibility to serve as the DNA in Oman. The move comes five years after the Sultanate ratified the Kyoto Protocol in 2005.
"Establishing a DNA marks a significant milestone on the road map laid down by the Sultanate of Oman for promoting green energy and environmentally responsible technology," said Dr Inderjeet Singh. Mohammed Salem added: "The establishment of the DNA is an incentive for investors in the Sultanate planning to invest in environmentally benign technologies. In addition, the DNA is committed towards a quick approval and turnaround of projects complying with all statutory clearances paving the way for the smooth progress of candidate CDM opportunities."
Supporting the DNA is a team of professionals with expertise in all facets of CDM development and assessment. The Authority has also put in place procedures for the submission of applications for candidate CDM projects, according to the PwC expert. "We understand the DNA is also planning to issue tentative no objection certificates to projects within a month of submission of the application, subject to all statutory compliance requirements being in place for the proposed project. "Clearly, the DNA is very keen to promote projects with energy efficiency and industrial gases along with promotion of renewable energy projects in the Sultanate," Dr. Singh noted.
Significantly, the DNA has also specified the terms for the sharing of benefits from the CDM initiative. CDM projects associated with renewable energy, energy efficiency, methane abatement and deforestation/afforestation have to pay an annual fee of RO 261 for every 1,000 tonnes of Greenhouse Gas (GHG) emission reduction from the project activity. This compares with an annual fee of RO 1,740 for every 1,000 tonnes of GHG emission reduction from any other kind of project activity. But time is of the essence, the experts stress, if Oman is to capitalise on the enormous benefits associated with the pursuit of CDM-related opportunities. This is especially so because the first commitment period of Kyoto regime is set to expire in about 30 months.
"The process of CDM project development, registration, monitoring, verification, issuance and transaction of emission reductions will take about 30 months or thereabouts, leaving almost negligible room for multiple issuances unless the Kyoto gets an extension." "Since the end of the first commitment period of Kyoto is fast approaching, it is important that Oman participates in international negotiations for a further extension of the protocol, in turn creating a conductive environment for the project proponents of the Sultanate. At the same time, capacity building in various sectors is required to sensitise project owners to quickly use all available opportunities," Dr Singh emphasised.
While the DNA's incentive-based tariff structure for CDM projects is set to spur the development of green energy projects, more policy intervention is necessary to fuel the growth of this sector, says Mohammed Salem. "The government has taken a clear stand in favour of energy efficiency and renewable energy initiatives by reducing the fee to be charged by the DNA for such projects. Since CDM revenue alone cannot create a surge in the renewable energy market, additional policy intervention by the government can play a major role in developing this sector. Providing such a targeted fillip to small-scale projects would acclimatise the sector with the necessary knowledge and the experience thus gained could translate into wider implementation in the future. This could very well be the start of long-term integration of renewable energy with the conventional sources of power, and the government's support at this critical juncture does lend economic and business sense to this environmentally sensible venture."
Importantly, the establishment of the DNA will help crystallise the recommendations of the Authority of Electricity Regulation, Oman (AER) on renewable energy development issued in 2008, said Dr Singh. "The formation of the DNA will go a long way in providing assistance for investments by both private and public entities in the renewable energy space. It will also contribute towards achieving the much desirable twin goals of safeguarding the environment and attaining energy security," he said. "These efforts by the government can further be extended in the future by introducing other targeted mechanisms like feed-in tariffs or renewable energy quotas as recommended before in the AER 2008 report.
The policy for promotion of renewable energy is slowly being formed following the 2008 study; advisers are being hired and the ministries and public sector are looking at support mechanisms and commencing pilot projects," he added. Further impetus to the pursuit of CDM opportunities will come when the DNA formalises the process of fee payment/reimbursement, considering the fact that not all eligible projects may get registered with the UNFCCC, and also in light of the fact that payments to the project proponents are linked to transaction of CERs in the international markets.
The experts also underlined the need for capacity building aimed at helping businesses explore and develop CDM opportunities. "Capacity building is the only option available at the disposal of the ministry; expert consulting firms like PwC are available in the region and can quickly help the Sultanate in identification of opportunities, channellising resources and procedures. The Sultanate may also approach multilateral agencies like the World Bank and GTZ to help them enhance their capabilities and make use of the opportunities available to the owners," said Dr Singh. PwC, for its part, is equipped to provide advisory services across the CDM chain -- from helping customers identify candidate CDM opportunities, taking them through registration formalities, and finally transacting emission reductions in the international market.
"In addition, we also intend to provide the necessary support to develop capacity through training and allied activities. PwC is also willing to create a knowledge network through its network firms to further speed up the project development work in the region," Dr Singh added. PwC has over 800 dedicated sustainability experts in more than 45 countries working together to provide sustainability change services to governments, public sector organisations, large multinationals, international organisations and bilateral and multilateral agencies across the globe.
© Oman Daily Observer 2010
