September 12, 2012
Panel Calls for Rescue of CDM
by Robert Kropp
Despite its flaws, the Clean Development Mechanism remains the only international framework for
funding renewable energy projects in developing nations, and meaningful emissions reduction targets
will help enhance its effectiveness.
The Clean Development Mechanism (CDM) has come
in for its share of criticism since its launch under the Kyoto Protocol, but it remains
the only international framework for helping developed nations meet their emissions reduction goals
by funding renewable energy projects in developing nations.
Yet, despite its
potential as a bridge between government policy and private investment, "The CDM is imperiled,"
warns a report
issued this week by an independent
high-level panel. "Carbon prices in the CDM market have declined 70% in the past year alone and
are projected to fall further."
Certainly, the global economic recession and the
subsequent Eurozone crisis have had much to do with the collapse of the international carbon
market. But as observers left frustrated by the lack of meaningful agreements at this year's Rio+20 conference on
sustainable development would agree, "Mitigation targets are so modest that they no longer create
strong incentives for private international investment and local action in developing nations,"
according to the report.
Mechanisms such as the European Union's Emissions Trading System (EU ETS)
exist for developed nations to reduce their own emissions. Despite the system's modest
accomplishments thus far, the recent announcement by Australia that it will link its system with
that of the EU suggests the potential for an eventual global system.
But without the
involvement of the rapidly expanding economies of many developing nations, meaningful climate
change mitigation and adaptation are unlikely to occur. According to the report, market instruments
are currently under development that may well prove to be more effective than the CDM. But it may
be years before these instruments become operational. "For the balance of this decade the CDM is
likely to remain the world's foremost—and possibly sole—means of gaining the benefits of a truly
global carbon market," the report states.
"Over the past decade, the CDM alone has helped
nations mitigate approximately one billion tons of greenhouse gas emissions in a manner that
realized $3.6 billion in savings for developed countries," according to the report. "Over this same
period the CDM has mobilized more than $215 billion in investments in developing countries, thereby
accelerating economic growth and poverty alleviation."
An increased demand for
international carbon transactions will only occur if developed nations act aggressively to
establish effective mitigation targets. If this were to occur—the next international climate change
conference is scheduled for December in Qatar—then the CDM's "experience with innovative climate
solutions through hands-on practical action" could prove useful. Also, "The CDM can also advance
this leadership role by facilitating the widespread adoption of best practices and uniform
technical standards, as well as by promoting appropriate international links across carbon markets
To play an effective role, the report acknowledges, the CDM will have to
reform its own operating procedures and governance mechanisms.
In all, the report offers
51 recommendations for addressing the crisis in carbon markets and utilizing such mechanisms for
mitigating climate change. "All of this is, of course, conditional on agreement by national
governments to increase their levels of ambition and to commit to the actions necessary to meet at
least the 2º C target," the report concludes.
Maggie Fox, the President and CEO of The Climate Reality Project, was the
only representative from the US on the panel. Following the release of the report, she stated, "The
United States must meet and go beyond President Obama’s pledge to reduce US emissions 17% below
2005 levels by 2020. We must do this because the threat from climate change demands it."
"We must also work constructively with other nations in global climate talks, where America
remains a major force, to bring about the reforms the panel has recommended," Fox continued. "It's
time for countries to step up and lead the world so we can stop this rolling catastrophe and get
started on a clean energy future."
In the aftermath of the report's release, the newly
launched UNFCCC Loan Scheme for CDM
announced the awarding of $3 million in interest-free loans for CDM projects in least developed
nations with fewer than ten registered CDM projects. Seventeen of the 23 projects, which range from
household-level energy efficiency to methane avoidance to transportation, are located in Africa.
Jan Mattsson, Executive Director of the United Nations Office for Project Services
(UNOPS), described many of the projects as "small scale and innovative project ideas that benefit
The Loan Scheme provides for four application deadlines per
year, the next of which is scheduled for September 30th.