Tuesday, November 08, 2005

Carbon Trading & Energy Efficiency

In this web event today, Tudor Constantinescu from the Energy Charter Secretariat gives an overview of carbon trading mechanisms and their link to energy efficiency. Mostly, carbon trading facilitates supply-side efficiency projects. Demand-side efficiency projects find it hard to compete, and there are few success stories. Bundling mechanisms for small-scale projects should be explored as an avenue.


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Hans said...

Questions and answers during the discussion:
1) Can energy efficiency be improved without increasing energy taxes?
Energy taxation is a hot issue. There is a large diversity of opinion on this subject. Basically, a system of carbon trading works for medium and large industry. It has the advantage that it is based on market mechanisms and that it is not only penalizing but has also a stimulating aspect. It is not applicable however for households, transport, agriculture and small enterprises. If you want to make those sectors contribute to the reduction of CO2 emissions in the same order of magnitude as larger industry, energy taxes seem to be unavoidable.

2) What is the critical size to make a JI project feasible?
The critical size is relative to the kind of project and the size of the sponsor company or organization. So it needs to be figured out for each project separately. The point is that the administration cost for the transaction of the Emission Reduction Units has to be worthwhile. A typical critical size could be 5 Meuro for a project with a multilateral institute. This means that for making smaller projects worthwhile, bundling is necessary.