Carbon Emission Reduction Fund to net over $300 m

by Lalin Fernandopulle

The Carbon Emission Reduction Fund, proposed in the 2008 Budget will come into operation next month and earn over US$ 30 million by marketing three million tonnes a year.

The fund was set up to promote carbon trading under the Kyoto Protocol in Sri Lanka. The Clean Development Mechanism (CDM) which is also called carbon trading was launched jointly by the developed and developing countries to address global warming.

The CDM was set up under the United Nations Framework Convention on climate change (UNFCCC) adopted in 1992 and the Kyoto Protocol in 1997.

Director General (Operations and Review) Ministry of Finance and Planning, Dr. B.M.S. Batagoda said a global market for green house gas emission reduction has been created under the CDM.

The Government will set up the Fund as a partnership venture with the private sector to help local companies to engage in carbon trading.

The need for carbon emission reduction in carbon trading is around 5 to 5.5 billion tonnes from 2008-2012. The annual demand for carbon emission reduction will be around 250-400 million tonnes.

Dr. Batagoda said Sri Lanka commenced carbon trading in 2000 and has a market of around 200,000 tonnes which was reduced from five projects and another 50 in the pipeline.

To sell carbon credits, a company can either reduce the existing green house gas emission from the establishment or plant trees which will absorb carbon from the atmosphere.

"Procedures have been set up locally and internationally to regulate carbon trading with measurements for validation and certification", he said.

Some of the eligible sectors for carbon trading in Sri Lanka are energy, industries, waste management, transportation, petroleum, agriculture, forestry and plantation.

A company can set up a project to reduce carbon emission by using CFL bulbs instead of incandescent filament lamps, using vehicles driven by electricity or gas, replacing inefficient machines, planting trees, setting up renewable energy projects and switching off unnecessary bulbs.

Obtaining a concurrence letter from the Ministry of Environment which is the designated national authority for carbon trading, preparing a Project Design Document (PDD) including calculations on carbon emission reduction, validation from an independent certification company accredited by the UNFCCC and registration of the project as a CDM project based on the validation report are vital to implement a project on carbon trading.

The actual emission reduction will be verified by a company accredited by the UNFCCC. A Certified Emission Reduction Certificate (CER) will be issued by the CDM Executive Board based on the verification report.

A developer can sell the CER at international carbon exchange markets or through bilateral carbon market agreements.

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