The nature impact and outcome of the clean development mechanism in Pakistan

Term Paper (Advanced seminar), 2013

23 Pages, Grade: 1,3



1. Introduction

2. What is the CDM

3. Emissions and CDM projects in Pakistan
a. Pakistan's emissions past and present
b. CDM projects in Pakistan
c. Effect of CDM on Pakistan's emissions and technological development

4. How has the CDM influenced Pakistan? A brief progress report
a. Government
b. Economy
c. Academia
d. Civil Society

5. Conclusion

6. Annex

7. Bibliography

List of abbreviations

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1. Introduction

In response to the global and growing dangers of climate change, the United Nations Framework Convention on Climate Change (UNFCCC) came into being as a result of the 1992 Rio Earth Summit. Its main goal is to stabilise greenhouse gas emissions and to stop or at least limit the negative outcome of global warming in future. The UNFCCC promotes two different approaches: mitigation and adaptation. Roughly summed up this translates into: we should avoid what cannot be managed and manage the unavoidable. These two strategies are complementary and non−exclusive. At the third Conference of the Parties (COP), held in Kyoto in 1997, the international community agreed on a protocol aimed at emission reductions of 5.2% in developed countries (Annex I) until 2012 in comparison to the base year 1990. In order to achieve this aim the Protocol introduced market−based flexible mechanisms for addressing climate change, including the Clean Development Mechanism (CDM), which allows Annex I countries to mitigate a certain amount of emissions in developing countries rather than at home. The mechanism therefore allows for more cost− efficient emission reductions. It is a noticeable factor for many developing countries. Between 2005 and 2013 the CDM has spurred worldwide investments of more than 215 bn$,1 more than yearly development aid at around 128 bn$.2 More specifically it has been claimed that Pakistan alone has received investments as high as 742 m$ until 2010 alone.3 The UNFCCC claims that a further annual revenue of 3f.24 m$ could be generated through the sale of CERs in that country.4 These figures are quite impressive, especially when compared to the yearly official development aid (ODA) that Pakistan receives, about 146.5 m$ in 2011 from Germany,5 as illustrated by Fig. 1.

Julian J. Fitz The nature, impact and outcome of the CDM in Pakistan 27.06.2013

fig. 1: Money transfers compared

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Pakistan is a party to the UNFCCC since 1992 and belongs to the Non−Annex I countries. It has ratified the Kyoto Protocol in 2005, the country's entry enables it to fully capture the benefits from the sustainable development initiatives under the CDM. Pakistan being a signatory to the UNFCCC ascribes to global commitments to combat climate change, however it has not agreed upon any binding targets and all actions remain strictly voluntary due to its Non−Annex I status. Recent events such as floods have shown its strong vulnerability towards the effects of climate change. Pakistan even considers itself to have been the worst hit country by weather extremes in 2012, ahead of Guatemala and Colombia.6 Therefore it should generally and genuinely be interested in combating climate change.

This is where the CDM allows for Pakistan to play a role. According to the UNFCCC Pakistan features as number 19 on the list of countries with most CDM projects. However this is still only about 0.4% of all projects worldwide, the lion's share going to China, India and to a lesser extent Brazil.7 Among Non−Annex I countries Pakistan is number 16 of the largest emitters and accounts for about 0.55% of the world's total greenhouse gas (GHG) emissions.8 Thus it seems to be slightly underrepresented and its capacity for CDM projects may not have been fully appreciated.

The main goal of this essay is to take a quick look at the nature of the CDM in Pakistan, analyse its impact on the country and finally assess what the outcome looks like. What is the CDM doing with Pakistan? How and where has it worked? Has it spurred any local effects? To this end I will start out by giving an overview of Pakistan's current emissions and possible CDM approaches and then take a close look at all 29 registered CDM projects.9 I will also assess whether these projects have had an impact on Pakistan's overall emission pattern and whether some form of technology transfer has taken place. In a second major part of this essay I shall try to identify the effects that the CDM has had and if it has been able to spur local development within the government, the economy or academia and civil society.

2. What is the CDM?

The CDM is one of the Kyoto Protocols three flexible mechanisms10 to combat climate change, which provide a market led approach to emission mitigation. It can roughly be described as a mechanism through which countries with fixed emission reduction targets can cut emissions in developing countries and get the amount of avoided pollution added to their account. Its two main goals are assisting developing countries (Non−Annex 1) in achieving sustainable development in accordance with the general ideals of the Kyoto Protocol and giving Annex 1 countries economically viable ways to comply with their emission reduction targets.11

More specifically CDM projects, once they have been agreed to by the host country, registered with the CDM Executive board and finally implemented, generate so−called Certified Emission Reductions (CERs). The process of CER production is outlined by fig. 2. One ton of CO2 equivalent (CO2e) in mitigated emissions is worth one CER. These reductions are traded internationally and can be purchased by Annex I governments or companies in order to comply with their emission reduction targets. However the market for CERs remains limited as the United States have never ratified the Kyoto Protocol and other important

Annex I countries have abandoned the emission trade, including Canada and Japan.12

illustration not visible in this excerpt

fig. 2: The CER process

The price of CERs has proven to be very volatile. As of May 2013 one ton of CO2e cost as little as 0.35 €, down from a price of 12.92 € in April 2011.13 This change can be explained by the general insecurity of the carbon market with important actors choosing to withdraw from it. In addition the major demand for CERs from the European Union is increasingly weak due to the recent economic decline. The low price of CERs directly affects the viability of new CDM projects. When planning a project the investment in mitigation should ideally be covered by the return on emission reduction allowances. Many CDM project designs read as follows: ”The rate of CERs is taken at a conservative US$ 15 (euro 12ƒ ton) […].”14 Some projects may not be profitable at the current price, others may not even be implemented at all for lack of trust in the future of the CER market.

3. Emissions and CDM projects in Pakistan

a. Pakistan's Emissions, past and present

The most recent reliable data indicates that Pakistan's total emissions amounted to 309.4 Megatons (Mt) of CO2e in 2008,15 about one third of Germany's emissions in the same year.16 This nevertheless represents an increase of about 70% from 1994 levels, when a national inventory was first conducted.17 The increase of emissions per capita has also been significant albeit smaller than the overall growth. When in 1994 an average citizen emitted about 0.64 metric tons this figure indicates that the same person would have emitted 0.97 tons in 2008,18 roughly one tenth of the average German's emissions.

The vast majority of Pakistan's emissions results from the energy and agricultural sectors and occurs mainly in the form of CO2 and Methane (CH4). Fig. 3 illustrates the overall development of emissions in Pakistan with special attention dedicated to the sectors where they arise, whereas figure 4 indicates how large the share of the different greenhouse gases is.

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fig. 3: Emissions in CO2e (Mt)

illustration not visible in this excerpt20

fig. 4: Emissions (2008 in %)

The largest part of Pakistan's emissions originates from energy generation. The projected development of the energy sector expects it to grow from 157 Mt of CO2e to 2730 Mt and be responsible for 64% of the country's emissions by 2050.21 To limit the adverse effects energy efficiency has to be increased. Pakistan's industry could save as much as 30% of its energy with another 30% possible increase in energy efficiency for buildings.22 This process already seems to be underway. The carbon intensity of the country's economy that may stand in as a proxy for energy efficiency has decreased from 0.52 kg of CO2e per $ of GDP to 0.39 in 2008 (under PPP conditions).23 There is still some room for improvement considering Germany's figure of 0.28 in 2008,24 but Pakistan has all but equalled the United States at 0.38 the very same year.25 In the next section I shall point out in more detail that several CDM projects in Pakistan address this issue. At least 22 of the 29 registered projects include energy or energy efficiency related measures.

Emissions from the agricultural sector, the other large chunk, however mostly occur in the form of Methane and are mainly caused by growing rice and farming cattle.26 Mitigating emissions from the country's second largest source is more complicated. For various reasons including higher costs, complicated decentralised action and property rights, cutting emissions in this field is generally regarded as difficult.27 Furthermore demand for agricultural products will be rising sharply as the populations grows and becomes wealthier, leading to more intensive land use with greater emissions.28 Consequently only two CDM projects tackle agricultural mitigation in any way, both of which receive no foreign funding. There seems to be little profitability in reducing agricultural emissions.


1 (UNFCCC, Benefits of the Clean Development Mechanism 2012 (Fact Sheet), 2012)

2 (OECD, 2011)

3 (Business Recorder, 2010)

4 (this estimate is based on the assumption that CERs trade at around 10 $ which is no longer the case) (Seres & Haites, 2008) p. 4f

5 (BMZ, 2011)

6 (Pakistan Environmental Newsletter 1, 2012) p. 9

7 (UNFCCC, Registered projects by host country, 2013)

8 (The Guardian, 2012)

9 As of 1.6.2013, this includes 7 Projects that have been registered yet not implemented at present.

10 Alongside the Joint Implementation and Cap and Trade mechanisms

11 (UNFCCC, What is the CDM about)

12 Canada has left the Kyoto Protocol altogether whereas other parties such as Japan, Russia or New Zealand have merely excluded binding emission reduction targets for the second implementation period, after 2012.

13 CER trade prices available online: http:ƒƒwww.quandl.comƒOFDP−Open−Financial−Data− ProjectƒFUTURE_CERf−ICE−ICE−ECX−CER−Emissions−Futures−Continuous−Contract−f−CERf−Front−Month 14 (MoCC 4, 2006)

15 (Mir & Munir, 2011) p. 10

16 (Umweltbundesamt, 2009)

17 In 1994 the total emissions amounted to 18f.7 Mt of CO2e

18 CO2 emissions (metric tons per capita, Pakistan): http:ƒƒwww.indexmundi.comƒfactsƒpakistanƒco2− emissions#EN.ATM.CO2E.PC

19 (Mir & Munir, 2011) p. 10

20 (Mir & Munir, 2011) p. ff

21 (Ahmed, Malik, Ramay, Munawwar, & Pervaiz, 2011) p. 17

22 (Ahmed, Malik, Ramay, Munawwar, & Pervaiz, 2011) p. 19

23 Pakistan − CO2 emissions (kg per PPP $ of GDP): http:ƒƒwww.indexmundi.comƒfactsƒpakistanƒco2− emissions#EN.ATM.CO2E.PP.GD

24 Germany − CO2 emissions: www.indexmundi.comƒfactsƒgermanyƒco2−emissions

25 CO2 emissions (kg per PPP $ of GDP) − Country Ranking: http:ƒƒwww.indexmundi.comƒfactsƒindicatorsƒEN.ATM.CO2E.PP.GDƒrankings 26 (Smith & others, 2008) p. 789

26 (Smith & others, 2008) pp. 789

27 (Smith & others, 2008) pp. 7−8

28 (Ahmed, Malik, Ramay, Munawwar, & Pervaiz, 2011) pp. 23−25

Excerpt out of 23 pages


The nature impact and outcome of the clean development mechanism in Pakistan
University of Potsdam  (Institut für Sozialwissenschaften)
Climate Change and Development
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ISBN (eBook)
ISBN (Book)
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CDM, Pakistan, Development, Cooperation, environment, climate change, renewable energy
Quote paper
Julian Fitz (Author), 2013, The nature impact and outcome of the clean development mechanism in Pakistan, Munich, GRIN Verlag,


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