Sri Lankan policy perspectives on the Clean Development Mechanism (CDM) and the Kyoto Protocol

The United Nations Framework Convention on Climate Change (UNFCC) and the Kyoto Protocol can be considered the most controversial international environmental treaties adopted in recent history. The Clean Development Mechanism (CDM) and the associated carbon trading scheme between developed and developing countries, particularly, have received significant attention from both developed and developing countries. The Kyoto Protocol is expected to cut 687 million tonnes from the 1990 carbon emission levels of the industrialized countries during the period 2008-2010. A significant portion of this carbon emission reduction can be undertaken as CDM projects, which will increase foreign exchange flows to developing countries from developed countries. This opportunity has to be studied seriously in order to maximize the benefit to developing countries. This paper reviews, with special reference to Sri Lanka, the global carbon trading market based on the principles of the CDM and the Kyoto Protocol. The paper estimates the potential for Sri Lanka of the carbon market under the Kyoto Protocol. The analysis suggests that power, waste, transport, forestry, and agriculture sectors offer good scope for CDM projects in Sri Lanka. Natural gas has been found viable for CDM projects in the power sector. The paper also argues that the existing 1.7 million hectare of scrub and chena (shifting cultivation) lands can be profitably used for CDM projects as energy plantation and dendrothermal power projects. Since the CDM is very controversial and countries have differing opinions on it, the paper also reviews the Sri Lankan position on the CDM. Finally, the paper presents the National Framework Policy on CDM in Sri Lanka. © 2002 International Energy Initiative, Inc.