Sri Lanka’s RE developers deserve better treatment
Sri Lanka, a committed signatory to global climate treaties like the Kyoto Protocol and Paris Agreement, has stirred controversy with its 2024 policy claiming ownership of all carbon credits from grid-connected renewable energy (RE) projects—solar, wind, small hydro and biomass energy. This applies to initiatives entirely funded by private developers, prompting outrage from the RE sector. They accuse the government, led by the Ministry of Environment, of breaching the UN’s Additionality Principle and undermining their investments.
The Additionality Principle is clear: carbon credits should reward emission reductions that wouldn’t occur without financial incentives from carbon markets. Sri Lanka’s private RE developers, however, built these projects with their own capital, not relying on credits for viability. By appropriating these credits, the government denies them a legitimate revenue stream, violating a bedrock of international climate frameworks. This isn’t a mere technicality—it’s a blow to the trust placed in private innovation to propel Sri Lanka toward its 2050 carbon neutrality goal.
For decades, Additionality has been a lifeline for RE developers worldwide, offering a modest return on investment through carbon credits—a principle Sri Lanka, as a UN member, pledged to uphold. Yet, the government now expects feed-in tariffs, set by the Ministry of Power and Energy, to compensate for this loss. This is unrealistic. Tariff committees, however well-intentioned, rarely grasp the immense costs and challenges private developers face in Sri Lanka’s RE landscape.
This policy, enacted via a Cabinet decision under former President Ranil Wickremesinghe, raises doubts about whether ministers fully understood its implications. Did they realise it jeopardises Sri Lanka’s standing under global protocols, where Additionality is a fundamental safeguard?
The consequences are dire: developers who invested to support national climate goals now face losses, potentially chilling future RE investment at a time when it’s urgently needed.
Catching up to fill country’s NDC (Nationally Determined Contributions) position that is periodically reported to the UN and global organisations, by literally ‘waylaying’ or taking away the carbon credits earned honestly by private sector initiatives shows height of misjudgment by Sri Lanka to say the least, and should alarm our Attorney General Departments and the BOI (Board of Investment) to start with, as we are, as a Member country, Party to the ensuing Global Protocols.
The fallout extends internationally, disrupting the Japan Credit Mechanism (JCM), a bilateral deal to share carbon credits. This contradiction, also rooted in Wickremesinghe’s tenure, has thrown the JCM also into chaos, casting doubt on Sri Lanka’s reliability as a global partner.
The Ministry of Environment and other officials lodging relevant official Cabinet Proposals for key decisions, must be held accountable. Pushing this policy through the Sri Lanka Cabinet smacks of bureaucratic overreach, eroding UN treaty commitments and private sector confidence. Even the new NPP government appears misled. Sri Lanka’s climate ambitions depend on partnership, not expropriation.
Feed-in Tariff adjustments may soon emerge for the RE industry with the presumed assumption by instigators of the ‘Only the State owns the Carbon Policy’ irrespective of private sector efforts to fund and develop the projects. This removes a vital buffer in this sensitive industry. Scientifically set feed-in tariffs are welcome but expecting them to fully offset investment losses while breaching Additionality is a grave misstep, threatening the future of RE in Sri Lanka that depends mainly on private-sector efforts. It’s time to reverse course, honour the Additionality Principle, and fairly reward those driving our sustainable tomorrow, and should draw attention by the Cabinet Secretary, the Attorney Generals’ Department and the BOI.
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