The below analysis was covered in a story by Bloomberg. You can read that article here.


After the launch of Renewable Certificate Mechanism (REC) in India, a frequent question in the minds of project developers is the comparison between Clean Development Mechanism (CDM) and REC mechanism. The below section covers some of the questions regarding the eligibility for CDM and REC, and the relative benefits under both mechanisms.

Q: Is a project eligible for REC benefit if it is already availing of CDM benefit?
A: The REC and CDM mechanisms are independent of each other. REC is a national mechanism which is focused on renewable energy generation whereas CDM is an international mechanism which is focused on Green House gas abatement.
Nowhere in its regulations the CERC has specified that availing of CDM benefit will disqualify a RE generator from accessing REC markets. Further, the CERC has clarified that “REC and CDM are different mechanisms” (Statement of Objects and Reasons dated January 14, 2010).

Q: Is the project eligible for CDM benefit if it also avails the REC benefit?
A: As mentioned above, the REC and CDM mechanisms are independent of each other, and from the CERC’s perspective, can co-exist. However, one of the fundamental aspects of eligibility for carbon credits in the “Additionality” criterion*. If the additional benefit of RECs is considered (even at a minimum of Rs 1.5/unit), it is likely that several projects that meet the additionality criterion under CDM without REC, are likely to not meet the criterion in the future when REC benefit is included.
However, for every project an analysis will have to be done on a case-by-case basis. For example, a project that meets the additionality criterion based on the feed-in tariff of a state, may still meet the criterion if the APPC + REC price is considered in one state, but not in another.

Q: How does the benefit under CDM and REC mechanism compare?
A: The benefit needs to be compared under various parameters:

Options REC CDM
Monetary Benefits More Less
Access ( Profit/Cost ) Less time More time
Certainty of Revenue Depends on enforcement of the mechanism Reasonable

Monetary benefit**: The REC mechanism, with a minimum price of Rs 1.5/unit, is clearly far more beneficial than the CDM mechanism. The below analysis illustrates this. For the purpose of the below analysis, we have analyzed several CDM projects that have seen issuance, and have factored in issuances for several years. We have also factored in projects from various geographies across India. As can be seen, the average realisation per unit of electricity produced from CDM is Rs 0.59 (excluding the outlier biomass project, it is Rs 0.64/ unit).

Process/ cost of access: The CDM process is notorious for its process delay and the costs that need to be incurred both in monetary terms and in time. It is not unusual to spend over 2 years in the registration process, and over a year before the first issuance is done. Monetization is therefore 3 years away from the date you start.

Source: UNEP Risoe and World Bank

Compared to this, the REC mechanism promises to complete the registration/ accreditation process in 2.5 to 3 months, and issuances can be done on a regular basis from there on (realistically, the minimum timeframe for this will be monthly). Thus, monetisation will be approx. 4-5 months from the start of the process.

Certainty of revenue: CDM is an established market, with 5-6 years of trading. Once the project is registered, there is reasonable certainty of revenue. The REC mechanism, on the other hand, is new and as yet untested. The success of the market will depend on the extent to which various state electricity regulators implement and enforce the mechanism.

Q: Is there a time limit after which the project should have been commissioned to be eligible for REC benefit (like in the CDM mechanism)?
A: No. As long as the RE Generator meets the eligibility criterion set out by the CERC (see our newsletters 1 and 3 for details), the project will be eligible to avail of the REC benefits, irrespective of the date of commissioning.

Q: Like in the case of CDM in some states, will revenue from REC have to be shared with the state utilities?
A: Revenue from sale of RECs will not have to be shared with the state utilities. This is because, based on the eligibility criterion, an RE Generator will only be able to get REC benefit if it remains out of the purview of benefits provided by state utilities. Since the state utilities neither gain or lose any revenue from an RE Generator accessing REC benefits, it is not required to be shared.

Q: Is an REC and CER inter-changeable?
A: Not yet. However, this is likely in the future. This is known as “fungibility”, and various experts believe that this is the way forward for the international emissions markets. Various other countries are already working on domestic emissions markets and linking them to the international markets.
In the future, it is likely that an REC will be inter-changeable with Energy Efficiency Certificates and potentially, even with Carbon Credit based on a predetermined formula. “Fungibility with Renewable Energy Certificates can be provided” – Dr Ajay Mathur, Bureau of Energy Efficiency, Ministry of Power (in a presentation delivered in March 2010).

*Additionality criterion under CDM can be explained as: The project would not have been possible without the ‘additional’ benefit of carbon credits. Thus, without the extra monetary benefits that carbon credits provide, the project would not have been viable, and thus not undertaken.
** Analysis based on CER prices as of November 1, 2010. A sample of projects from different technologies, and covering different geographies in India were selected. Only projects that have seen multiple issuances were chosen to eliminate the impact of any particular year.


Vishal Sahgal · November 20, 2011 at 11:16 am

If a project avails both CDM and REC benefits, does it not lead to double counting of environmental attributes like CO2 offset?
Thanks for someone to clarify at

Goodpal · April 23, 2012 at 10:09 am

Quite delighted to read the comparison between REC and CDM mechanisms. It is an important issue for all renewable energy producers who are planning to enter into Indian Market. The local and international instruments will have to converge ultimately in the future. The “Additionality” criterion is clearly designed to make otherwise un-viable projects viable through the CDM financing.

Vivek Muskan · November 4, 2012 at 3:36 pm

It is a wonderful comparison, very knowledge giving.

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