Economic feasibility of clean development mechanism project in landfill in Viçosa – MG

Abstract

The Clean Development Mechanism (CDM) was developed in the Kyoto Protocol in order that the signatory countries to reduce their emissions of greenhouse gases effects. In the case of Brazil, there is the  development of CDM projects applied to landfills. The costs of the landfill are a major constraint on this kind enterprise, especially in small municipalities. The Clean Development Mechanism (CDM)  allows municipalities to earn income by selling carbon credits for a long time after its implementation, which might function as  a way to stimulate the deployment of these landfills and to reduce the cost constraint of small municipalities. In this sense, the present paper aims to calculate the economic feasibility of implementing a CDM project at the landfill in Viçosa-MG. To investigate the economic feasibility of this project, Net Present Value (NPV) and Internal Rate of Return (IRR) are calculated. The calculations showed that NPV and IRR for this project would be  feasible if price of carbon credits had been much larger than it is today. The conclusion is that the project is economically unfeasible. The main reason is that the amount of waste produced daily by the city is relatively small (19 tons / day). As suggestion, one possible way for this project to work economically without causing financial damage to the city would be the formation of a consortium among several cities to increase the amount of waste lay in daily, and the division of implementation and operation costs of the landfill.