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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 worldwide."

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 traditional communities."

The Loan Scheme provides for four application deadlines per year, the next of which is scheduled for September 30th.


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