Clean Development Mechanism (cdm) Projects and the South African Mining Industry: Key Legal Issues for Consideration

The international legal foundation of the Clean Development Mechanism and the key requirements for successfully embarking on such projects are introduced. Potential opportunities for South African mining companies are highlighted. An explanation of national legal authorisation requirements will follow with reference to a hypothetical coal bed methane capture project as a case study. Issues such as Environmental Impact Assessment, requirements in related legislation such as the Gas Act, and compliance with host country sustainability criteria will be incorporated into the presentation. In conclusion potential contractual and process risks will be identified so as to prepare project proponents for the realities of embarking on such a project. 1. WHAT IS THE CLEAN DEVLOPMENT MECHANISM (“CDM”)? A Clean Development Mechanism (“CDM”) is defined in Article 12(1) of the Kyoto Protocol to the United Nations Framework Convention on Climate Change (“UNFCCC”). The UNFCCC is the product of intense international negotiation on the impact of human-induced (anthropogenic) greenhouse gas (“GHG”) emissions on the global climate, and was opened for signature at the United Nations Conference on Environment and Development (the first ‘World Summit’), held in Rio in June 1992. The UNFCCC came into force on 21 March 1994 and aims “to achieve stabilization of atmospheric concentrations of greenhouse gases at levels that would prevent dangerous anthropogenic interference with the climate system”. (UNFCCC, Art. 2). Countries listed in Annex I to the convention (i.e., developed countries, mainly those in the Organization of Economic Co-operation and Development [“OECD”], and certain countries with ‘’economies in transition’’ in Central and Eastern Europe), committed themselves to the aim of returning, individually or jointly, to their 1990 levels of GHG emissions by the year 2000. In retrospect very few countries actually achieved this target. Other Parties to the convention are known as non-Annex I countries. These Parties, mainly developing countries, do not have GHG emissions reductions targets. South Africa is a non-Annex I country. At the first Conference of the Parties (“COP 1”) to the Convention (Berlin, 1995), many Parties indicated that the aims of the convention were too broadly stated and that more detailed targets were needed, and that modalities and procedures for achieving these targets should be prescribed. A new round of talks was instituted and, after two-and-a-half years of intense negotiation, the Kyoto Protocol was adopted at ‘COP 3’ in Kyoto, Japan on 11 December 1997. The Kyoto Protocol covers the emissions of the following six major GHGs: ● Methane (CH4) ● Carbon dioxide (CO2) ● Nitrous Oxide (N20) ● Hydrofluorocarbons (HFCs) ● Perfluorocarbons (PFCs) ● Sulphur hexafluoride (SF6) A major achievement of the Protocol is the elaboration of specific GHG emissions reductions targets for those countries listed at Annex B to the Protocol – the majority of which are also UNFCCC Annex I countries. (For convenience sake the convention has arisen to refer to Annex I, rather than Annex B countries). These reduction commitments amount to a cut of at least 5% from 1990 emission levels (Kyoto, Art. 3). Annex I countries are granted a five-year “commitment period” during which they are expected to comply with their individual targets. The first commitment period is between the years 2008 to 2012. Terms governing