So far, the cumulative number of renewable energy systems such as solar photovoltaic (SPV) irrigation pumps in the agriculture sector in India is far below their theoretical potential despite government subsidy programmes. One of the major barriers is the high costs of investments in these systems. The clean development mechanism (CDM) provides industrialized countries with an incentive to invest in emission reduction projects in developing countries to achieve a reduction in CO2 emissions at lowest cost that also promotes sustainable development in the host country. SPV pumps could be of interest under the CDM because they directly displace greenhouse gas emissions while contributing to sustainable rural development. However, there is only one SPV project under the CDM so far. This study assesses the maximum theoretical as well as the realistically achievable CDM potential of SPV pumps in India. Due to mitigation costs of 24-242 is an element of per ton CO2 at current CER prices of less than 15 is an element of, SPV pump projects are not viable. However, substitution of diesel pumps could be made viable by a relatively limited subsidy. While the maximum mitigation volume is more than 214 million ton CO2 on an annual basis, an estimate of achievable CER levels is done using the past diffusion trends of SPV pumps. We find that annual CER volumes could reach 50,000-100,000 by 2012 and 0.25-0.75 million by 2020. This would require that the government sets the subsidy level for SPV pumps at a level that allows them to become viable with the CER revenue. From a macroeconomic point of view this makes sense if the sustainability benefits are deemed sufficiently high to warrant promotion of this project type. (c) 2006 Elsevier Ltd. All rights reserved.
