Standardized Baseline Setting Methodology for Energy Related Projects in the International Climate Change Policy

After five years of Kyoto Protocol, now it is the time to review its impact and possible improvement, although KP itself in a sense suffers from a decline in the number of countries accepting emission quota. One notable feature of KP was the introduction of baseline-credit mechanism called the Clean Development Mechanism (CDM) to assist nations to reduce emissions within the assigned amount. There was several mistakes pointed out in the design of this mechanism, and among them is the dominance of non-energy related projects in the supply of the credits. Now, the reform of CDM is proposed by the CDM-EB (executive board) and still the scheme developed by the UN for CDM is considered a valuable infrastructure which can be shared by many alternative mechanisms as well as regional agreement which make use of offset schemes. However, among the proposed reform is the standardization of baselines which seems to contain several potential problems. In this paper, we shall examine several problems in this proposal taking the instances of projects which improves the emissions from a coal-fired power plant as discussed in Hayashi and Michelowa (2012).  Among others, the proposal attempt to bind together several project options from energy efficiency project like the use of supercritical technology, to fuel switch project like a switch to LNG, and ultimately to the renewable energy. Mixing these together, the proposal sets the baseline and additionality criterion at a certain percentage point of the cumulative distribution. We shall point our several issues spotted in this proposal and try to fine a better option. Based on these observations, we examine the method to strike a balance between transaction costs and environmental integrity. See above See above