Abstract
The clean development mechanism (CDM) was created with two main goals: help developed countries achieve the greenhouse gas emissions reduction targets set out in the Kyoto Protocol and provide sustainable development to developing countries who host the projects. Sustainable project management shares the same goals as the CDM project, which could be a valuable asset in the development of new projects. Much has been discussed about the effectiveness of the program in achieving those goals and even more in the post-2012 period when the CDM has experienced fewer new projects and lower certified emissions reduction (CER) prices compared to previous years. Based on Brazilian CDM project data, this works aims to analyze the economic aspect of sustainable management by observing the influence of the obtained CERs on the internal rates of return (IRRs) of a small hydro plant (SHP) according to the current CDM scenario, marked by CER prices reaching their lowest historical values. For this study, a spreadsheet was developed to simulate a project’s cash flows and thus determine its IRRs. The results show that using the current CER prices, carbon credits do not significantly affect SHP projects’ IRRs, with increases of less than 0.2% compared to a scenario with no credits. CDM projects may benefit more from optimizing the investment costs or increasing energy production. These results highlight a need to emphasize the sustainable benefits of the CDM program rather than only focusing on the economic return perspective.
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Abbreviations
- CDM:
-
Clean development mechanism
- CER:
-
Certified emissions reduction
- COFINS:
-
Contribuição para o Financiamento da Seguridade Social
- GHG:
-
Greenhouse gas
- IRR:
-
Internal rate of return
- NPV:
-
Net present value
- O&M:
-
Operation and maintenance
- PIS/PASEP:
-
Programa de Integração Social/Programa de Formação do Patrimônio do Servidor Público
- SHP:
-
Small hydro plant
- tCO2e:
-
Ton of carbon dioxide equivalent
- TFSEE:
-
Taxa de Fiscalização de Serviços de Energia Elétrica
- TUSD:
-
Tarifa de Uso dos Sistemas Elétricos de Distribuição
- UNFCCC:
-
United Nations Framework Convention on Climate Change
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The authors thank the support of the Coordination for the Improvement of Higher Education Personnel - Brazil (CAPES) and Universidade Federal Fluminense (UFF).
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Monteiro, L.S., Costa, K.A., Christo, E.S. et al. Economic feasibility analysis of small hydro power projects. Int. J. Environ. Sci. Technol. 18, 1653–1664 (2021). https://doi.org/10.1007/s13762-020-02931-6
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DOI: https://doi.org/10.1007/s13762-020-02931-6