By Climatico Contributor: Roddy Boyd
The fate of the Clean Development Mechanism, the most robust and successful United Nations’ instrument to fight climate change, hangs in the balance at the 17th Conference of the Parties. It risks being used as a negotiating ‘chip’ in the penultimate COP before the Kyoto Protocol’s (KP’s) first commitment period ends. A leading climate change NGO explained that the KP is expected to ‘emerge alive from the conference, but it will be on life support.”
Along with Japan, Russia and the United States who have all said that extending the commitments after 2012 is not possible without industrialised countries taking targets, it surfaced that Canada may even withdraw their ratification and participation in the KP before the end of this year: an accusation that they are yet to refute. If it is true, it could have wide ranging consequences for future negotiations.
Hurdles from ‘Further Commitments’
As we covered before Durban began, expectations of any successes with respect to the KP’s CDM and Joint Implementation were low. Even an acknowledgment that they may continue to live without the KP would be seen as an achievement.
It seemed, however, that whenever the Ad-hoc Working Group for the KP (AWG-KP) discussed ‘Further Commitments’, the rift between Annex I, emerging economies and non-Annex I countries was ever present.
Almost as a warning, many developing countries are pushing for another commitment period and highlighting that the CDM would not be possible without one, with the vulnerable Small Island States demanding a new commitment period within a year.
Even though the KP has no clear termination clause, any extension to its bodies and mechanisms will need UNFCCC COP approval. China and Brazil therefore stepped up to explain that it is ‘inconceivable’ to have the CDM [and JI] without the KP, and that they would vote to block such an extension. It was suggested that developing countries could end up ‘restricting access’ to CDM offsets if a second commitment period is not reached.
Because China represents around 60% of the total offsets issued so far and to some extent drives the price with its floor price for CERs, this move would worry investors in the CDM by facing large degrees of uncertainty on its future. Already, record low market prices and risks from limitations on what CERs are accepted for compliance under the EU ETS are driving interest elsewhere.
The EU has also been involved with discussing potential ‘new’ market mechanisms for offsetting emissions, by using ‘national policy baselines’ as a means to standardise and measure offsets from national emission trajectories. In doing so, Japan’s case for a non-UNFCCC mechanism could become possible.
Executive Board Reports
Meanwhile, the COP listened to an update on progress from the CDM regulatory body, the Executive Board. As well as explaining the EB’s successful efforts to streamline approval processes, generate simpler additionality guidelines, and continue work on standardised baselines for methodologies, the EB chair reiterated that uncertainty surrounding the CDM post-2012 is potentially a crippling factor to progress.
In an effort to encourage deployment of the CDM to the Least Developed Countries (LDCs), a CDM loan scheme was launched this week, expected to be operational within a few months. It was first discussed in Copenhagen COP15 negotiations, and now has a fund around $4.4 million (USD). For countries that have less than 10 registered projects registered in the CDM, loans can be provided to projects in order to cover their feasibility studies, validation and registration expenses which can sometimes lead into the tens of thousands of USD.
The move can be seen as a positive one, in that it could kick start many new CDM projects. The EU is a strong supporter of LDC CERs. After 2012, strict limitations will mean only certain types of CERs will be allowed for compliance in the emissions trading scheme – those from LDCs being eligible until 2020.
As the CDM moves slowly forward, negotiations look like the KP is having a smaller and smaller impact. As Point Carbon points out, if the US had ratified the KP in the first place, the KP may have covered half of the world’s emissions. Without the US, and adding other Annex I countries like Japan, Russia and Canada along with many non-Annex I followers to the list of non-KP supporters, a second commitment period could potentially see only 15% of the world’s emissions. This means that the scope of the CDM could reduce dramatically.
If the CDM is seen in isolation from the KP, further work on its life post-2012 could be possible. At the moment, further commitments (nevertheless) bring the COP to a standstill.