Kampala — The Dutch government has rejected a bid to buy the carbon credits from the Bujagali project.
AES corporation, the developers of the project could have used the funds to finance its construction, which has been marred by controversy. The money would have been paid under the Clean Development Mechanism (CDM).
Countries signatory to the Kyoto protocol are required to pay for carbon credits as a commitment to reduce global emissions.
Last year AES proposed to the Dutch government to recognise the project as a source of carbon credits under the Clean Development Mechanism.
A Dutch government institution SENTER, sent officials here last year to access the project potential.
PricewaterhouseCoopers was also contracted to carry out an independent audit of the project.
SENTER had said it was ready to pay over $6.5m per 1,000 tones of carbon for 10 years starting 2006.
Mr Pieter van Geel, State Secretary for Housing, Spatial Planning and the Environment approved 18 climate projects in developing countries on 13 March.
Bujagali was not among them. Efforts to talk to SENTER officials were futile but CDM officials said SENTER cited the controversy the projected would have attracted.
"The Dutch have decided not to contract Bujagali as a CDM project. Their explanation was that the "baseline" was not rigorous enough, but they were also worried about the controversy that the project would have attracted," Mr Ben Pearson an official from CDM said in an email.
The approved projects will now be submitted to the CDM Executive Board of the United Nations Convention on Climate Change (UNFCCC), for approval and registration, so that transaction of emission reductions can take place.
This final step will take another six to nine months, SENTER said on their website. The World Bank also signed a $4m similar deal with the West Nile hydropower project last year.