Climate Policy

Climate Policy 4 (2005) 399–418

Research Article

CDM wind-energy projects: exploring small capacity thresholds and low performances

Luis Mundaca and Håkan Rodhe

Received 28 July 2004 ; received in revised form 17 January 2005 ; accepted 25 January 2005

This article analyses existing small-scale wind farms located in India as hypothetical projects implemented under the Clean Development Mechanism (CDM). It addresses them from three different viewpoints (sustainable development, financial feasibility and institutional conditions), focusing mostly on identifying the smallest capacities and lowest performances at which these cases may become attractive for CDM investors. Although the case studies exhibit the potential to achieve the dual objective of the CDM; based on our estimates of related transaction costs we find that small-scale CDM wind farms that generate a minimum of 3,500–5,000 certified emission reductions (CERs) per year may start to attract the attention of CDM investors, as long as a minimum of just US$5 per CER is obtained and supportive strategies such as project bundling and unilateral implementation model are in place. Lessons from the Indian wind-energy experience indicate that non-Annex I countries interested in attracting the attention of CDM investors for wind-energy projects should undertake domestic efforts to build institutional and human competences capable of supporting both their domestic windenergy markets and the development of CDM wind-energy projects in general. Some policy recommendations are drawn.

Keywords: CDM; Small-scale projects; Transaction costs; Wind energy

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