Role of the clean development mechanism (CDM) in assuring project feasibility in Brazil - Case study: The alcohol fuel program and the hybrid photovoltaic-diesel system in Amazonia

This paper has two key objectives: to contribute to discussions on the importance of the Clean Development Mechanism for the implementation of projects which ensure reductions in carbon dioxide (CO2) emissions in Brazil, while analyzing if an existing cooperation project might have been planned and implemented differently if it had been organized as a CDM activity right from the start. To this end, two case studies were selected for analysis: Brazil's Alcohol Fuel Program, and the electrification of remote areas through hybrid photovoltaic-diesel systems. The former is fully managed and financed domestically with no outside support, while the latter is the outcome of an international cooperation program. In the first case study analyzed in this paper, we see that the Fuel Alcohol Program can only be revived to the same level at which it was operating during the mid-1990s through some type of financing mechanism, meaning that no over-ambitious comeback was considered. This would be a new cooperation model for this project, as until now Brazilian Government subsidies have been used. However, Brazil is undergoing a phase of institutional modifications in the energy sector, meaning that there little headroom at the moment for incentive policies supporting the alcool production. The CDM has a important role in the second case study too. The new subsides created buy the government to finance renewable energy projects that reduce fuel consumption in an economically feasible manner will not be sufficient to ensure the feasibility of hybrid systems, due to the high cost of photovoltaic panels. This could make the CDM a key factor in ensuring the feasibility of this energy alternative. In this case study, we also note that there is almost no difference between the cooperation model adopted by Brazilian and US institutions for the implementation of the hybrid system and a CDM activity model. The only difference would be the need to include an independent accredited entity to assess, certify and monitor the emissions avoided. The rest of the cooperation project linking the NREL-DOE and CEPEL-CEAM as described seems to comply seamlessly with the requirements of a CDM activity.