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From the Editor's Desk...

India and China Emerge “CDM Kings” via Different Routes

India and China jointly account for over half of expected average annual CERs. But the two countries have very different profiles and face different challenges. India leads in number of CDM projects and the number of issued CERs -- 35 per cent of all registered CDM projects (287 over 826) and 34 per cent of all CERs issued come from India. China leads in projected volume from registered projects -- 45 per cent of all expected annual CERs are from China, compared to 16 per cent from India.

India entered the CDM market in April 2003. Since then, the Indian CDM pipeline diversified into projects from 30 economic sectors, mainly small (on average 70,000 credits per year), although the observed trend is that it is increasing. Few CDM projects were developed by state owned companies and municipalities. The first Chinese CDM project reached validation phase in November 2004. Since then, the Chinese CDM pipeline developed around few core CDM methodologies; almost 33 per cent of Chinese CERs come from HFCs, 16 per cent from hydro and 9 per cent from coal mine methane projects. The Chinese CDM market is dominated by state-owned companies that develop mainly large projects (on average of 270,000 credits per year).

The approval process by the designated national authorities (DNA) of the two countries is quite different. The Indian DNA was able to process many projects and issued letters of approval generally after a two month period. Also, unilateral CDM projects are allowed by the Indian DNA. In China, CERs are considered a state-owned asset and different levels of taxes are levied on CERs from HFCs, N2O and methane capture projects. Until recently, only bilateral CDM projects were allowed.

The challenge for India is to engage more the public sector in CDM; identify larger scale projects and attract more finance in the CDM primary market, while Chinese project developers need to move away from “low hanging fruit” and identify project opportunities in other sectors.