Demand-side energy efficiency promotion under the Clean Development Mechanism: lessons learned and future prospects

This paper provides an overview of the significance of end-use energy efficiency improvement for sustainable development and of the status of such projects under the Kyoto Protocol's Clean Development Mechanism. It provides an independent analysis of the relevant decisions that have been taken by the CDM Executive Board/Methodology Panel, with a view to: (1) identifying key issues raised, (2) deriving lessons learned, and (3) evaluating whether issues have been handled consistently. It is clear from the analysis presented that the CDM is only making a very small contribution to promotion of energy efficiency (approximately 140 kt CO2e (carbon dioxide equivalent) per year), despite significant potential for improvement in developing countries worldwide.The paper therefore offers recommendations on how to improve the process, including creation of a dedicated energy efficiency working group or practitioner/expert forum to derive international best practice with respect to (1) monitoring and verification of CDM projects, drawing on existing protocols, and (2) common elements in the design of CDM baseline methodologies for end-use energy efficiency projects. The recommendations are based on a detailed analysis of common challenges facing such “demand-side” energy efficiency projects and means of overcoming them.The paper also argues why the CDM Executive Board and Methodology Panel need to acknowledge and give greater attention to the differing nature of the three efficiency markets - discretionary retrofit, planned replacement, and new installations - when developing guidance and tools.