Thermo-Solar Power Plant in Morocco, operating costs supplemented by CDM (Source: World Bank Photo Collection)

By Guest Contributor: Natalie Antonowicz

During the first week of the Cancun Conference, several main and side events were held regarding the Clean Development Mechanism and Joint Implementation (CDM/JI). Attendees included not only the parties to the COP, but also observer organizations, and other intergovernmental organizations. The majority of these events focused on the future of the mechanism, particularly after the expiration of the first stage of the Kyoto Protocol in 2012.

The need for CDM reform is “widely recognized”. Almost all parties agree that the CDM must be reformed, but are divided about how this is to be done. Proposals for reforming the global carbon market vis-a-vis the Clean Development Mechanism have been highly contested at COP16. Pundits have stated that “[e]veryone wants the CDM either for its cost-effective offsetting opportunities or as a source of inbound clean-tech investment”, and that the mechanism – and the debate about it – does not follow the traditional developed-developing country divide. According to the International Emissions Trading Association, the way in which the CDM operates is less important than assuring certainty that it will operate effectively, and that the international carbon market will, as well.

Currently, projects undertaken through the Clean Development Mechanism are approved on a case-by-case basis. Some have argued that this process causes administrative delays. The pace of project approvals under the CDM remains a major issue at COP16. Private sector developers applying for approval have identified concerns with not only the pace of approvals, but also with a lack of transparency in the process.

According to a draft document published by the United Nations, ‘standardized baselines’ have been considered as an alternative to the current approvals system. Such baselines would allow polluters to gain credit for emitting below the set baseline. Although standardized baselines were rejected at the 2009 Copenhagen Conference, they are being considered again, largely because of their potential to help bring about a net increase in the number of projects eligible for credit under the CDM. Advocates of standardized baselines argue that enacting them “would curb transaction costs of obtaining credits”. The UN draft proposes permitting project developers to “submit proposals for the use of standardized approaches in new or existing methodologies to the executive board for its assessment and approval”.

Other points of contention at COP16 include the support of OPEC states, such as Saudi Arabia, for extending projects that qualify for CDM credit to carbon capture and storage initiatives.  This suggestion is, however, strongly opposed by many developing and developed countries, led in part by Brazil.

Some fear that the Clean Development Mechanism will be abandoned when the first stage of the Kyoto Protocol expires in 2012, due to the inability of states to agree about what it ought to encompass. Considered among the most successful components of the Kyoto Protocol, a failure to extend the CDM may lead to a failure to extend the Protocol itself, particularly in light of Japan’s recent opposition to a second Kyoto commitment period.

At COP16, the Subsidiary Body for Scientific and Technological Advice “invited Parties and admitted observer organizations to submit to the secretariat, by 28 March 2011, their views on the implications of the inclusion of reforestation of lands with forest in exhaustion as afforestation and reforestation clean development mechanism project activities”. This shows that parties are looking towards new means of keeping the CDM viable and effective.

According to observers, multiple outcomes are possible for the Clean Development Mechanism at COP16. The first, and most unlikely is a second commitment period for the Kyoto Protocol. The second, is a temporary extension of the protocol. The third, and most likely to materialize in Cancun, is an extension to only the CDM, and not the entire Kyoto Protocol.

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