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August 2008

Country Profile Guatemala

Flag of Guatemala Guatemala’s energy sector was privatised in 1997. This open marketplace with private-sector investor participation may provide a more favourable environment for investment than neighbours such as Belize, Honduras, and Mexico, whose markets are more closed.

Rising electricity demand and droughts have caused the energy matrix to move from mainly hydro in the 1980s to mainly thermal today. Support for renewables in Guatemala began to grow as early as the 1980s, however. Guatemala has substantial hydro and renewable resources, but these are widely scattered geographically with the result that small-scale installations are the norm. New legislation to incentivise renewable energy installations, promote cogeneration projects and provide grid access for small generators has been passed since 2003. This may provide an advantage to small CDM projects.

This kind of development is being held back, however, by strong social resistance to hydro projects, supported by national NGOs and local politicians. The regulatory framework in the electricity sector can also easily change and institutions are weak, providing an uncertain environment for potential investors.

Guatemala has considerable experience with renewable energy CDM projects – mainly hydro but also biomass, biogas and geothermal. It also hosts one energy efficiency and two landfill gas projects. There is interest in developing more cogeneration, efficiency, landfill and forestry projects. Currently, 16 projects are in the pipeline, of which ten are registered. With 36% forest cover, projects in the LULUCF sector can also have large potential in Guatemala.

Guatemala’s DNA office (the National Clean Development Office) is located within the Ministry of Environment and Natural Resource (MARN). Its website at present does not include information on the CDM approval process. During 2005 and 2006, a project was carried out by UNEP Risoe and the local NGO Fundacion Solar with the aim of creating a fully operational CDM entity with clear and consistent rules and a portfolio of CDM projects in Guatemala. As the CDM office cannot evaluate and promote CDM project development at the same time, the promotion side has been delegated to other organisations previously involved in the sector. The Ministry of Energy and Mines has created an information centre for renewable energy and a fund to support it. A Centre for Cleaner Production (CGPL), sponsored by local universities, trade associations, and the Swiss government, aims to promote industrial efficiency and has attempted to become involved in CDM projects by providing capacity building and technical assistance. None of the projects for which the CGPL prepared PDDs or PINs has yet been registered at the UNFCCC, however. Additional capacity building for CDM is furnished by the Asociación de Generadores de Energia Renovable (AGER), a local trade association that supports geothermal and hydro generation in the country. This entity stages two seminars each year on the potential for CDM. Fundación Solar, a local NGO, works with communities to deliver electricity and has taken an active role in promoting CDM by sponsoring studies and giving presentations that explain carbon markets and Guatemalan potential for utilisation of the CDM.

Requirements for host country approval

For national approval, the project developer needs to present the PDD, a copy of the corresponding environmental evaluation instrument approved by MARN, a declaration to comply with the commitments acquired in the environmental evaluation instrument, a summary of the project’s contribution to sustainable development, a declaration that the project complies with the relevant national and sectoral laws and policies, and a technical report stating the emission reductions to be achieved annually. The CDM office then assesses the documentation, meets with the project proponents if necessary and visits the project area before recommending to the DNA whether to approve or reject the project.