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The Carbon Rating Agency publishes the first risk assessment of a Programme of Activities

19 May 2009

Programmatic CDM is one of the most important developments in the CDM world and is attracting the interests of the most farsighted players in this space. It is being recognised as the natural bridge between the first and the second commitment period, and it has great potential to enable the move from measuring tons to constructively affecting the emission trends of developing countries. However, there has been a very slow uptake due to regulatory and design issues. Better understanding of the challenges inherent in programmatic CDM (pCDM) development is crucial to promote the uptake of the small scale projects under this very promising category.

The Carbon Rating Agency (CRA) has developed a unique risk assessment methodology to evaluate pCDM, which combines a bottom-up analysis of project activities with the specific considerations applicable for specific pCDM risks. The CRA's pCDM evaluation process provides a comprehensive risk assessment enabling the project participants to understand both the registration risk of the PoA as well as the performance risks of the first and subsequent CPAs.

CRA is leading the way in setting the analytical framework for government and private sector participants to manage a successful pCDM capability, by developing rigorous risk assessment tools that can assist developing economies to be at the forefront of the imminent market needs.

CRA relies on its experienced team of senior advisors including Christiana Figueres (Vice Chair of the Carbon Rating Agency). She has been instrumental in developing the thinking on pCDM for several years, and remains involved in its implementation. Having joined the company in early 2008, Christiana has provided crucial insights for the development of the pCDM evaluation methodology.

CUIDEMOS Mexico CFL programme of activities

The first PoA assessed under the CRA Programmatic evaluation tool was the CFL distribution Programme CUIDEMOS Mexico. The rating provides an overview of the PoA structure and presents its main challenges.

The evaluation considers the risks related to the distribution plan, the incentives presented to the distribution partners and the target population, the coordination of the educational campaigns to promote the exchange of light bulbs and the verification process for CFL installation.

The financial feasibility of the PoA is evaluated in light of current CER prices and the variations in the exchange rate resultant from the financial crisis. Modelling of the possible price scenarios provide a revised approach of the expected PoA returns.

The Mexican CFL rating report has already been recognised as a useful instrument by developers engaged in pCDM:

"The pCDM Rating is a useful instrument to enhance investors' confidence in pCDM. It contributes to better understanding of how PoAs are structured and what kind of support is needed for the expansion of such activities."

Phil Cohn
Cool Nrg International

It also received the support from other market participants:

"The CRA analysis is crucial to understand how the program is intended to work and helps the reader to build an opinion on the risks associated with the program. I can only encourage the CRA to keep on with their analytical effort in this domain."

Dr.Klaus Oppermann
KfW Bankengruppe

The Carbon Rating Agency is already engaged in evaluating PoAs in Asia and Africa. As the pCDM market develops, CRA envisages an increased need for an independent overview of all the risks perceived in such emerging mechanisms. CRA initiative of developing a specific tool for pCDM evaluation will assist companies getting involved in next generation emission reductions and enhance credibility in this market.

For a sample of the Mexican CFL report, please contact the Carbon Rating Agency: info@carbonratingsagency.com

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