Global warming has been considered as the existential threat for the man kind. The global community has identified many responses to reduce the impact of global warming; effectively reducing the emissions from coal burning is a major step in this regard. Coal power plants, which are considered to be the major source of Green House Gases (GHG), are at the focus of such efforts. The Clean Development Mechanism (CDM), under the patronage of United Nations Framework Convention on Climate Change (UNFCCC), was adopted in 1992 by most countries as a major global response to reduce global warming.

CDM permits industrialized countries (Annex 1 countries under Kyoto Protocol) to earn emission credits through investment in sustainable development projects that reduce overall GHG emissions in developing countries. The CDM allows emission-reduction projects to earn certified emission reduction (CER) credits, each equivalent to one ton of CO2. These CERs can be sold to industrialized countries to meet a part of their emission reduction targets. This mechanism was designed to stimulate sustainable development and emission reductions, while giving industrialized countries some flexibility to meet their emission reduction limitation targets. Most of these reductions are through renewable energy, energy efficiency, and fuel switching (coal to non-coal options).

India is one of the leading countries, which has registered for a number of such CDM projects. Within the power sector four coal power plants in India are known to have applied for such CDM registration on the premise that the super critical technology to be deployed in such projects would lead to reduced CO 2 emission, and hence qualify for financial benefits under CDM. This scenario calls for a serious examination of such a claim because a detailed examination of nominated coal power projects will reveal that such projects will result in net increase in CO 2 emissions, and hence defeat the very purpose of CDM.

Super critical coal power plants will only reduce the emissions marginally. Such coal power plants are expected to involve an increase in thermal efficiency from about 33 – 35% for sub-critical coal power plants to about 37-39%, and may corresponds to a reduction of about 4 to 5% in emissions only. But such super critical coal power plants will consume a lot of coal, and water; they lead to destruction of thick tropical forests below which are the coal reserve; and they pollute the air, land and fresh water sources. Hence while the GHG potential of such individual coal power plants will be marginally less as compared to sub-critical coal power plants, the overall increase in GHGs at the country level will be much higher because of the addition of large number of such power plants. This defeats the very purpose of UNFCCC and CDM.

As has been the past experience, the regulation of pollution control measures in India is far from satisfactory, and hence adding super critical coal power plants does not necessarily lead to overall reduction in GHGs and atmospheric pollution. Due to higher operational costs of pollution control measures many such coal power plants may not continue to take care in reducing the pollution. Whereas the provision of CDM benefits to additional coal power plants may encourage the proliferation of such coal power plants, the fact that the overall GHG potential will increase enormously must initiate a thorough review of the very idea of CDM as applied to coal power plants.

Most environmental groups have called for an end to crediting coal plants with fighting global warming. Many experts who are closely following the CDM process have estimated that allowing new coal power projects to measure their emissions levels against older sub-critical coal power generating technology allows the project developers to exaggerate their greenhouse gas savings by 25 to 50 percent above where they actually are. As has been noticed recently there is a spurt in such power projects coming up in India, probably with a view to garner financial support of CDM, which otherwise might have been found economically unviable. The enormity of the problem can be gauged by the coal rush witnessed in the country with the reported approval of more than 170 coal fired power plants last year alone; this means nearly one project approved each working day. It is not difficult to imagine the huge impact on our society of so many additional coal power plants.

It is a small consolation that a CDM advisory panel that reviews the methodologies behind various offsetting schemes has recently recommended that the CDM benefits to coal power plant be suspended immediately. The Executive Board of the CDM is expected to take up that recommendation during a meeting shortly. “The (coal) projects perpetuate the burning of coal, the world’s most carbon intensive fossil fuel,” CDM Watch says in a note commenting on the methodology panel’s recommendation. “The financial support of coal projects fundamentally undermines the CDM’s climate mitigation goals.”

In this context the very idea of providing financial support to coal power projects, even if they super critical power plants, appear preposterous. In Indian scenario, where the electrical power generating capacity has increased from about 1,000 MW in 1947 to about 170,000 MW in 2010, the gross inefficiency prevailing in generation, transmission, distribution and utilization of electricity is so huge that even the very idea of additional coal power projects seems sacrilegious. The social, environmental and economic impacts of coal power plants are so massive that a moratorium on additional coal power plants seems eminently advisable. The fact that the integrated energy policy has projected an increase in coal power capacity from about 80,000 MW in 2006 to about 400,000 MW by 2031-32 provides enough room for serious concerns, because most of the additional capacity projects are likely to be the candidates for CDM benefits.

In this regard a 3,960 MW Ultra Mega Power Project (UMPP) in coastal Andhra Pradesh, which was registered in the CDM system recently, is an example. Many such UMPPs are reported to be in pipeline and they all are likely to be applicants for CDM benefits. It is estimated by Sierra Club, Washington that this project when commissioned may cause over 12.3 million tons of excess carbon emissions to be emitted, and could result in an undeserved profit of about € 123 million based on current CER prices. Now if this much of CO2 emissions and CERs are multiplied by the number of UMPPs proposed, it means a lot of additional CO2 emission and a huge drain of CDM funds. At a time when green technologies are starving of essential funds, diverting huge sums of money for such coal projects which will only add to GHG emissions may be termed by many as criminal waste of scarce resources. Even if half of such funds were to be spent on energy efficiency improvement programmes in developing countries, it will mean a huge reduction in G
HG emissions, and numerous benefits to those communities on a sustainable basis. It is very unfortunate that UNFCC has ignored this stark reality.

As opposed to such a practice where profiteering by few private corporates are seen as encouraged by CDM, adequate investment in various green technologies will result in massive benefits to the society in addition to drastically reducing the GHG emissions. Investing in improving operational efficiency in generation, transmission, distribution and utilization of electricity will give a lot more benefits without any of the attendant pollution related issues of additional coal power plants. Such efficiency improvement measures alone in India may mean an addition of more than 20,000 MW of virtual capacity, and equate to avoiding burning billions of tons of coal and millions of tons of GHG emissions. It should not be ignored that the aggregate technical and commercial losses in Indian power system are very high of the order of about 35% as against the world best practice of less than 10%. Without plugging this leak effectively it would mean a huge drain on the society to invest in additional coal power plants; even in super critical coal power plants.

The recent interim report of the expert group on low carbon strategies under Planning Commission has estimated that the efficiency improvement measures in power sector alone can reduce GHG emission by 200 Million Tons of CO2 equivalent by 2020 in India. Whereas these measures will provide perpetual benefits to the society in addition to improving the global environment, the additional coal power plants, even if they are super critical coal power plants, will lead to perpetual costs to the society. These efficiency improvement measures come at a much lower capital cost and at much lower overall societal costs.

India also has a huge potential in distributed renewable energy sources, which while reducing the GHG emissions to the minimum levels, will also address many problems of the grid based power network. Since the coal power plants have many hidden costs the true cost to the society of renewable energy sources will be much lower. Hence a coal power plant, even if it is a super critical coal power plant, must not be seen as a way of reducing the GHG emissions in India. Financial incentives through CDM for such coal power plants will be a criminal waste of international funding.

At a time when many CDM projects are coming under increased scrutiny because of their potential human rights abuses, it seems especially problematic to register coal based power projects in many states which have violently suppressed civil dissent. “CDM is supposed to promote sustainable development, and coal-based energy production is far from sustainable” say Alyssa Johl from the Center for International Environmental Law. “Coal-based power projects have serious negative impacts on the environment and human health that will impose real and significant long-term costs on governments and communities alike. Local communities have good reason to be concerned.”

Another issue that needs to be addressed is that while the large number of additional coal power plants in India will go to add to the base generation capacity, the power deficit in almost all states is more during peak hours than on the annual basis. This situation of a large number of coal power plants coming up in a short span of 5-10 years is likely to lead to a stage soon when there will be excess base generation capacity with the result that the overall Plant Load Factor (PLF) will come down drastically at a huge cost to the society. Many of the coal power plants may turn out to be uneconomical and may have to be shut down.

Hence the CDM based funding to the developing countries such as India, Pakistan, Bangladesh, Indonesia etc. should be prioritized in power sector: firstly on efficiency improvements measures until the overall efficiency of the power sector in each country reaches the internationally acceptable levels; and then only on locally available renewable energy sources.

Research Article by:

Shankar Sharma
Policy Power Analyst
Karnataka