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Harnessing the Potential of the CDM for Closing the Pre-2020 Gap: A Case for Reform

This presentation highlights the current status of the Clean Development Mechanism (CDM), its benefits, and the need for reform. It argues that the CDM can play a crucial role in closing the pre-2020 emissions reduction gap and suggests potential functions for the CDM beyond 2020.

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Harnessing the Potential of the CDM for Closing the Pre-2020 Gap: A Case for Reform

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  1. Thomas Forth Advisor to BMUB, Division KI I 6 European and International Climate Policy, New Market Mechanisms Harnessing the potential of the CDM für closingthe pre-2020 gapLACCF Po6September 05, 2014Bogotá, Colombia

  2. CDM status I • CDM has demonstrated its capability as a project-based mechanism to set incentives for additional emissions reductions • The contribution to combat climate change is significant • Almost 1,5 billion CERs issued • More than 7.500 CDM projects • A theoretical potential to generate 8 billions CERs until 2020 • But it is unlikely to reach this number under actual political conditions

  3. CDM status II • CDM has worked in the political margins of its original intension • Providing certificates in a cost-efficient manner for AI • 3,6 billion USD cost saving • Raising investments in Non Annex I – countries contributing to sustainable development • 215 billion USD on the investment side • High co-benefits (more than 600 USD / CER)

  4. CDM status III • The question is only why the CDM is put on risk • The answer is simple and crude: the readiness for taking adequate commitments on emission reduction is lacking since 2009 • As consequence some relevant groups are thinking the time for the CDM is over and reform is not needed • The real consequence is only that we could loose a well implemented mechanisms with well functioning institutions, good governance practice, a bulk of useful technical tools and a broad understanding of the functioning of this mechanism on the user side

  5. Reasons for the CDM pre-2020 We need a CDM reform best before Paris! • To define the role of markets in new climate agreement we should the progress on consensus building in the negotiation; the CDM reform is clear and ripe and useful for direct use • CDM is not only a technical tool for result-based financing; using the CDM cycle ensures good solution for accounting rules, especially for avoiding double counting and claiming • The CDM is also a useful tool for emerging domestic scheme; one should refrain from inventing new certificates for domestic market mechanisms

  6. Reasons for the CDM pre-2020 II • Furthermore the CDM is a good solution for the FVA; the use of the CDM will reduce the complexity of the growing fragmentation of the carbon market Classical function of the CDM before 2020 • The CDM is still a usefull mechanism for the primary market, even if the demand is low; • There are reasons to hope for an expanded demand • As it is the key question of this plenary the CDM could provide the international co-operative fundament for closing the pre-2020 gap • If we get the historical level of demand we have a chance to harness the 8 billion CER potential

  7. Reasons for the CDM pre-2020 III • There are reasons to work on this challenge • The ambition raising debate is still ongoing under KP CP II • The question is which other ways re on the table to raise the ambition to the necessary level for closing the gap? • Only domestic policies? • First step on this road is the mobilization of money to help good CDM projects survive without sufficient private demand

  8. Reasons for the CDM beyond 2020 • The CDM has only a chance, if we reach consensus of the function of the CDM beyond 2020 • Which functions are realistic? • Main market mechamisms for certain countries (LDC, low income countries) • CDM could be the module under a new market mechnisms for including an active role of the private sector • The understanding of the actual debate of the CDM reform should not be: this is the last step before phasing it out • The CDM as bottom-up uncomplete mechanism is a reform mechanism from the very early start

  9. THANK YOU FOR YOUR ATTENTION • Thomas Forth • Thomas.Forth@bmub.bund.de • Office: +49 30 18305 3668

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