No Gas (sourced from: The U.S. National Archives)

The United Nation’s flexible mechanisms were introduced as a cost-effective and efficient method to help poorer countries develop sustainably, whilst providing developed countries another option to meet commitments under the Kyoto Protocol.

The Clean Development Mechanism (CDM) and the Joint Implementation (JI) have progressed at different rates, with different levels of engagement and varying degrees of scope in the ensuing emission reductions. One project sector has benefited more than others and recently, has come under fire for its environmental credibility. But what is the issue and why is it so politically toxic?

A Failure or Success?

The Montreal Protocol was established to regulate a certain type of gas: ones that are believed to be responsible for ozone depletion. Difluoromonochloromethane, better known as HCFC-22, is one such gas that is still used in refrigeration and air conditioning processes in many developing countries. It is a by-product of HCFC-22 in which we are interested: HFC-23 (another hydrogen-based gas also called fluoroform).

HFC-23 has a 100-year global warming potential of between 11,700 (UN) and 14,800 (Intergovernmental Panel on Climate Change), meaning that over 100 years, one metric tonne of this gas has the equivalent global warming impact of 11,700 tonnes of carbon dioxide. Its use is not currently governed by the Montreal Protocol, but the UN Framework Convention on Climate Change (UNFCCC) realised that the potential impact to the atmosphere was too significant to ignore. As a result, they chose to include the destruction of HFC-23 in the CDM and JI via the Kyoto Protocol.

Because reducing one tonne of CO₂ equivalent by a project generates one Certified Emission Reduction (CER – the currency of the CDM), destroying one tonne of HFC-23 generates 11,700 CERs. Consequently, the emission reductions generated through the CDM by destroying HFC-23 have outstripped all others: out of the 421 million CERs issued to date, HFC-23 contributes 52% from only 18 projects.

To some, CDM projects that destroy HFC-23 have been a great success, by increasing liquidity and bulking up the volume of CERs that are generated. But to others, the vast amounts of CERs which have been generated are windfall profits to polluters, and can perversely incentivise the increased production of HFC-23.

Rocking the Boat

Environmental NGO, CDM-Watch, proposed last month an amendment to the methodology which CDM HFC-23 projects conform. CDM-Watch alleged that some operators of HFC-23 projects could be “gaming” the system in order to gain more CERs (which on the secondary traded market are currently worth approximately €12).

The group questions the adequacy of the ratio of HCFC-22 to HFC-23 that is used by projects to calculate their emission reductions. Currently, the rules set the maximum ratio at 3%, so 0.03 tonnes of HFC-23 to 1 tonne of HCFC-22. But the proposal sees this reduced to a minimum of 0.2%

The CDM’s Methodology Panel, the body charged with overseeing the methodologies of the CDM, chose to ask the higher-profile CDM Executive Board (EB) to decide on the issue. There remains a good chance that the EB fails to reach a verdict and instead passes the issue up to the UNFCCC because of how politically charged this topic has become.

Indeed, CDM-Watch appears more than aware of the politically sensitivity that surrounds the HFC-23 controversy. CDM-Watch warned that EB members from China, India, Netherlands, UK, Japan and Norway should abstain from voting on the proposed methodology revision due to conflicts of interest. These countries either host the projects or have vested interest in the CER generation.

In any case, the proposal has caused a stir in the CDM and participants are looking for certainty. The EU and the US have both made suggestions that offsets generated by the destruction of HFC-23 may be banned from their respective carbon reduction plans after 2012 (if one is ever enacted in the US). So investors in HFC-23 reduction projects are right to be concerned.

If restrictions are approved, it is still unclear when they will take place. Current project contractual agreements indicate that the EB may have to wait until a project requests an extension to their crediting period (usually seven years, with the possibility of two extensions) before amending the methodology. In fact, a request to extend the crediting of a certain HFC-23 in South Korea was postponed last month by the EB until a later date, certainly until something more concrete has been decided.

It seems that the workhorse of the CDM is under threat. Just less than 50% the world’s HFC-23 is included in the CDM (since no HFC-23 projects were eligible after 2004). A proposed amendment to the Montreal Protocol could cover the rest, essentially sealing off HFC from further commercial interest. But how the CDM, JI and their participants react to its current piece-of-the-pie remains to be seen.

The Bonn UN Climate Change Talks in Bonn, Germany is taking place between 31 May – 11 June 2010. Representatives from 182 governments are in attendance, picking up on unresolved issues left over from the UN Climate Change Conference in Copenhagen (COP 15) this past December and putting forward a path for the implementation of international climate change action.

Day 1

The first day of the Bonn Climate Change Talks were dedicated to the SBI and SBSTA opening plenaries. The flexibilities mechanisms were discussed under the SBSTA, with disagreements voiced regarding carbon capture and storage (CCS) and exhausted forests under the CDM, although standardized baselines under the CDM will be discussed.

Yvo de Boer spoke to the press, emphasizing that the two week negotiations will remain on track as long as participating nations maintain their focus on finding a common way forward towards a concrete and realistic goal for the UN Climate Change Conference (COP 16) in Cancún later this year. In addition, he warned that a postponed outcome at the Copenhagen meeting last December does not mean that the impacts of climate change had also been postponed.

A reception hosted by the German government was held later in the evening on Monday to celebrate Yvo de Boer’s tenure as Executive Secretary and wish him farewell.

Day 2

Tuesday marked the opening of meetings for the Ad Hoc Working Group on Long-term Cooperative Action under the UNFCCC (AWG-LCA) and the Ad Hoc Working Group on Further Commitments for Annex I Parties under the Kyoto Protocol (AWG-KP). In addition, contact groups met to discuss technology transfer under the SBI/SBSTA, non-Annex I communications under the SBI, and other issues including documentation on LULUCF, flexibility mechanisms, and methodological issues.

Under the AWG-LCA, the Chair’s draft text was introduced and several parties noted that it was a good basis for beginning the discussions.  However, some delegates noted concern over the loss of a separate section on finance, perceived imbalance, and the potential for a significant growth in text length, as well as the possible impact of time spent in contact groups on the available negotiating time.

Yvo de Boer also addressed the conference, highlighting Copenhagen’s progress toward a technology mechanism, including a climate Technology Centre supported by regional units, raising the potential for partnership opportunities between governments and the private sector.

Day 3

Wednesday’s schedule consisted of contact group meetings and informal consultations. Issues under discussion included national communications, LDCs, the financial mechanism, capacity building, privileges and immunities, Annex I emission reductions, preparation of an outcome for presentation at COP16 (Item 3) under the AWG-LCA, and other issues under the AWG-KP.

Finance was a hot topic of the day, under discussion during the AWG-LCA contact group meeting. The AWG-LCA Chair provided a list of questions regarding the enhanced provision of financial resources which was then discussed during both the morning and afternoon group meetings. Many delegates noted a positive and constructive tone to the discussions, although complaints included discussions going in circles, parties maintaining their pre-Copenhagen positions, and the role of the UNFCCC being threatened by various parallel initiatives.

Day 4

On Thursday, delegates met together for contact groups as well as informal consultations. Issues under discussion included a review of the Adaptation Fund, intergovernmental meetings and capacity building, Annex I emission reductions, research dialogue, the Buenos Aires programme of work (decision 1/CP.10), and preparation of an outcome for presentation at COP16 (Item 3).

The fourth day of negotiations took on a positive tone with signs of progress. A proposal put forth by AOSIS and backed by several other developing countries called for joint discussions between the two AWGs of Annex I emission reductions (limited to Annex I countries). This proposal was well received although broader joint discussions on the topic of mitigation still face large opposition. In addition, the US and some other developing countries might not be on board with the AOSIS proposal. Also making headway, the LULUCF submission by developing countries received positive response along with the agreement to reconstitute the legal issues group under the AWG-KP.

Day 5

On the fifth day of negotiations, the AWG-KP plenary took place and contact groups and informal consultations occurred. Topics under consideration included Annex I national communications, Annex I emission reductions, arrangements for intergovernmental meetings, preparation of an outcome for presentation at COP16 (Item 3), technology transfer, and the focal point forum under the NWP convened.

Discussion over COP16 and side event arrangements took place and speculation arose over the still-undeclared location of the negotiating session taking place this autumn ahead of Cancún. The hope for joint discussions between the two AWGs was not as strong as the day prior. However, the energy may rise again when delegates meet for the final week of the Bonn climate talks.

Day 6

The second week of negotiations on Monday began with more contact groups and informal sessions. Under discussion: the Buenos Aires program of work (Decision 1/CP.10), preparation of an outcome for presentation at COP16 (Item 3), capacity building, the scientific, technical and socio-economic elements of mitigation, and Annex I emission reductions.

The topic of the joint meeting of the two AWGs arose again following the weekend hiatus. Of focus on Monday was the issue of common space for the AWGs, but no consensus has yet been reached. Despite support from AOSIS and various countries in Latin America, the US had not indicated that it would get behind such a meeting and some countries amongst the G-77/China remained in opposition.

LULUCF has also been receiving attention this week: transparency in LULUCF accounting is appearing to gain headway, a common position on reference levels was taken by the G-77/China, and reference constructions are showing signs of opening up.

Day 7

The topics of discussion during Tuesday’s contact groups and informal consultations included: the financial mechanism, capacity building, national communications, review of the Adaptation Fund, preparation of an outcome for presentation at COP16 (Item 3), and Annex I emission reductions.

With closing plenaries taking place on Wednesday, not much new was presented as delegates worked hard to wrap up issues under consideration over the past week. At noon, an informal briefing took place by the UN Secretary General’s High-level Advisory Group on Climate Change Financing (AGF) in which members announced that  potential finance sources are currently being prepared in a report which is hope to be completed and presented before COP16 in November.

Day 8

Wednesday marked the end of the climate talks in Bonn. Contact groups and informal consultations took place during the day to discuss Annex I emission reductions and the preparation of an outcome for presentation at COP16 (Item 3). Later in the day, the SBI and SBSTA convened for their closing plenaries.

On Wednesday afternoon, a joint SBI/SBSTA session took place in order to say farewell to the outgoing UNFCCC Executive Secretary Yvo de Boer. Thanking the negotiators, IGOs, NGOs, industry, and his colleagues for their work over the past fourteen years, de Boer stated that “we do not have another fourteen years” to show that the UNFCCC can deliver progress. He noted that as negotiators work towards a legally binding agreement, there are divergences over the meaning of “legally binding” which serves as an advantage as it enables a broad definition. He further emphasized that agreements on several complex subjects cannot be reached with “15,000 people in the room” but through a “clear mandate to work in a smaller group and report back to the COP.” In his closing remarks, de Boer concluded that negotiators “will not only try, but also succeed.”

Read Yvo de Boer’s farewell statement here.

Further Reading

Bridging the road from Copenhagen to Cancún – Can the Bonn Climate talks lay any firm foundations? (Posted 31 May 2010 by Sabrina Chesterman)

France has prepared for positive Bonn outcome (Posted 6 June 2010 by Jennifer Helgeson)

Bonn Climate Talks: Paving the way to Cancún (Posted 8 June 2010 by Sabrina Chesterman and Nyla Sarwar)

As the 32^nd session of the UNFCCC Convention subsidiary body gets underway at the Hotel Maritim in Bonn, many will be hoping the talks can deliver some measure of mediation between parties and begin carving a real path towards Cancun. Outgoing Executive Secretary of the UNFCCC, Yvo de Boer, had urged all Parties to ‘overcome differences and work for greater clarity on what can be agreed to by all Parties for Cancun in December.’  The UN’s top climate change official, who will be replaced by Christiana Figueres from Costa Rica after the Bonn meeting, has promoted negotiators to gain finality on the architecture that will launch inclusive and effective global climate action. In an attempt to prevent deadlock in the talks, as witnessed at Copenhagen, do Boer has focused specifically on the need to conclude on “mitigation targets and action, a package on adaptation, a new technology mechanism, financial arrangements, ways to deal with deforestation and a capacity building framework”.

Making allies rather than enemies will be crucial if the talks at Bonn are to proceed. A strong coalition is the Alliance of Small Island States (AOSIS), supported by more than 100 Parties, has already asserted it will not shift from its position centred on mitigating global temperatures to a 1.5 degree rise above pre-industrial levels to stabilise atmospheric greenhouse gas concentrations below 350ppm. Grenada, on behalf of AOSIS, has already affirmed that this goal must be reflected in the draft negotiating text. These small island states, some of the most vulnerable to continued climatic change and associated implications such as sea level rise, have been resolute in their demands that pledges of 2°C will not be sufficient.

It is expected the US will be an important voice with their negotiating team having already flagged to the Ad Hoc Working Group on Long Term Co-operative Action (AWG-LCA), one of the two subsidiary bodies of the UNFCCC, that it does not recognise the current text proposed as a basis for negotiations. Although the Copenhagen Accord was not formally adopted by the Conference of the Parties, 120 of the 194 UNFCCC parties have signed the Accord, consequently countries like the US are pushing for the Accord to progress under the Convention. The official position of the Secretariat coming into the Bonn meeting was the fact the Accord can be used as part of the negotiation process. This has come under fire from India and China, countries pivotal to the negotiations, citing that the talks should be based on the existing UN tracks namely the Kyoto Protocol and Long Term Cooperative Action (LCA). The task at Bonn is to try and find a medium between these and come up with a new draft that adequately integrates the Accord as well as the existing tracks.

Financing mechanism will also be high on the agenda, with the 26 developed countries that drew up the Copenhagen Accord pushing for the establishment of a Green Climate Change Fund. The Fund, proposed as one financial entity of the Convention supports projects and policies relating to mitigation for example REDD plus as well as adaptation projects through support, capacity building and technology transfer. A priority for the Bonn talks will be to shape how the US$30 billion pledged by industrialised countries at Copenhagen can be utilised in the near term (up until 2010) to kick-start climate action in developing countries. Issues of contention include the governance and leadership of the Fund, currently suggested to be under a board nominated by the Conference of the Parties, however many developing countries are hesitant with this notion. It is essential this promise of funding is met, and a clear road ahead until 2012 is made to regain some trust between the developed and developing nation negotiation blocks. It is essential a transparent and agreed upon methodology is employed to prioritise the most vulnerable countries and appropriately apportion financing through the Fund in this manner.

The UN climate change body has come up with a new draft which has elements of the Copenhagen Accord as alternative options for the nations to agree.  The Chair of the LCA group will be hoping to bridge these contrasting views, especially mediating talks between the small island states, China and India and the developed nation block. An indicative roadmap has already been proposed to guide the road to Cancun in December, however major speed bumps include issues related to mitigation, finance, measurement, reporting and verification. The greatest block is the global temperature targets and according emission limits, and negotiators at Bonn will have to grapple between either committing to deep cuts in the near term or setting up a longer term more ambitious global reduction plan.

Top priority on the agenda is the preparation of an outcome from the Bonn talks which can be to be presented to the Conference of the Parties in Cancun for adoption to enable the full, effective and sustained implementation of the Convention. In addition developing countries will be focusing on the need for cooperative action now, up to and beyond 2012, especially with regards to clarity on the future of the Kyoto Protocol. The crux is again likely to occur with the US wanting a legally binding agreement for all relevant parties, especially China, the greatest emitter of CO₂ with the developing countries likely to reiterate their stance on historical responsibility.

The two week Bonn session represents a significant portion of the remaining negotiating time before Cancun and therefore priority needs to be on finalising the architecture around the fast-track funding and ensuring funds can be efficiently and equitably distributed as laid on in the Accord. In addition do Boer needs to try and align political leadership and iron out political instabilities to try and ensure Figueres can captain and floating ship to Cancun. Almost all the Parties agree there is an urgent need to conclude a legally binding agreement, therefore the Bonn talks need to ensure a comprehensive implementation package is making its way to the table.

Climatico analysts will be following the progression of the meeting through daily updates as well as a concluding analysis.

South Africa’s Minister of Tourism, Marthinus van Schalkwyk, and former Minister of Environmental Affairs has emerged as one of the frontrunners to replace Yvo de Boer as chief of the United Nations Framework Convention on Climate Change UNFCCC. In the follow up to de Boer’s resignation, candidates from Indonesia, India, Costa Rica and van Schalkwyk from South Africa, were promoted for the position by their respective national leaders. As the race draws to a close, van Schalkwyk and Costa Rica’s Christiana Figueres have emerged as the key candidates for the role.

 Despite the disappointments at Copenhagen, de Boer still leaves big shoes to fill, with regards to his unwavering energy, rigour and experience he applied to coercing paradoxical sovereign interests at key climate negotiations. His successor, van Schalkwyk as predicted, or Figueres, will have to ensure that the developed – developing country divides witnessed at Copenhagen do not exacerbate. Furthermore, the new Executive Secretary will have to illicit exceptional leadership and diplomatic skills if climate negotiations are to regain credibility and have any measure of success in carving out policy to abate and adapt to climate change.

A big feather in van Schalkwyk’s cap is the expectation of a formal legally binding treaty being ready by the time COP 17 occurs in December 2011 to be hosted by South Africa. Having developing country leadership of the UNFCCC and leadership from the country hosts is viewed as one of the best chances of securing a treaty and succession to the Kyoto Protocol.

van Schalkwyk has had a chequered political history under the apartheid regime, emerging as Minister of Environmental Affairs under appointment from South Africa’s former President Mbeki in 2004. This ministerial experience has given van Schalkwyk positive standing with high profile countries in the UN. In addition, South Africa has been praised for the emissions cuts it announced in the run up to Copenhagen, although the recent approval of a $3.75 billion from the World Bank for the Medupi power station has jeopardised these target’s and South Africa’s approach to climate change mitigation. van Schalkwyk may also face opposition in the form of Figueres’ importance in encapsulating gender issues in leading climate change action. UN general secretary Ban Ki-Moon has the ultimate authority to make the appointment, expected in the near future.

Retreating Lake (image by: suburbanbloke)

Just last week, the United Nations’ Clean Development Mechanism (CDM) reached a monumental milestone of delivering reductions of 400 million tonnes of CO₂ (equivalent) sourced from developing countries all over the world.

Critically, market participants are disappointed by the progress of the CDM so far, but should we be dejected by what we have seen?

Stunted Growth

It should not come as a surprise that the mechanism is receiving some questionable commentary.  The main direction of criticism comes predominately from the numbers of the emission reductions made through the project-based mechanism.  The main unit of currency for the CDM is the Certified Emission Reduction (CER) where one CER equates to the reduction of one tonne of CO₂(e).

Initial forecasts by analysts expected the CDM to generate at least 1.4 billion tonnes of emission reductions up to the end of 2012.  Since CERs are the main source of income for most emission reduction projects, they are important for the whole operation of mechanism.

Projects have been issuing CERs from sometime in October 2005, this meant that at the beginning, the CDM was anticipated to generate at least approximately 200 million per year.  So why has it only generated 90 million per year on average and what is now expected going forward?

Complex Simplicity

The beauty of the CDM, when it was born out of the flexible mechanisms in the Kyoto Protocol (KP), was that it brought a new direction to reducing emissions.  Simply, it allowed rich, developed countries to offset their emissions whilst ensuring that poorer, developing countries took a sustainable path to development and additionally received a flow of cash from rich to poor.

However with its simplistic basis, it was essentially a unique and complex creation that bridged political, regulatory, development and economic ideologies.

All bases had to be covered, and all parties involved had to benefit equally which brought with it a host of teething problems:  procedural delays by the administration of the CDM; projects under-delivering on their expected emission reductions; poor market prices for CERs discouraging project owners from issuing CERs; the recession limiting CDM output and other issues relating to auditors and developers lacking knowledge coupled with a steep learning curve.

Importantly, the official link between the project proponents (developers, owners, etc.), the auditors and the body charged with oversight of the CDM requires a great deal of attention.  Fortunately, looking ahead, this reform is beginning to receive the consideration it needs- see previous blogs on this subject.

Timing is Crucial

Since the CDM began, over 2,100 projects have been registered.  This is perhaps the most crucial stage on the project timeline – it means that the project can begin to keep track of its carbon reductions.

Of these registered projects, almost 700 have actually issued CERs.  It is from these projects that the 400 million tonnes of emission reductions have originated.  We are waiting for around two-thirds of the registered projects to issue, which potentially leaves a lot of reductions in the pipeline.

Positively, the future is bright for the CDM.  So far, almost 40 developing countries are benefiting from transfers of technology, expertise and the sustainable development criteria that all projects have to meet, not to mention monetary flows.  Secondly, the carbon market is also immature relative to other, more established markets and problems in its operation are likely to occur but can be fixed.

A point to mention is that presently, around 75% of the emission reductions in the CDM originate from only two project types: the industrial gas projects.  This is because these projects were the cheapest and easiest to carry out, with the largest return – the so-called ‘low-hanging fruit’.  What this means is that the rest of the projects are going to deliver relatively smaller reductions, hence limiting the potential output of the CDM in the long-term.

In addition, an overarching issue with the CDM is that it is directly linked to the Kyoto Protocol.  Unfortunately the KP is only technically valid until the end of 2012; the first commitment period being 2008-2012.  Consequently, the CDM is also only technically valid until the end of 2012 bringing with it a wide range of uncertainties that could stifle any prolonged investment.

Should we see 500 million before the end of 2010, it will mark a significant response of the CDM to the challenges mentioned above.  The extension of the flexible mechanisms beyond 2012 is a major concern that current UNFCCC negotiations are aiming to tackle among other things.  Watch this space.

The United Nations Framework Convention on Climate Change (UNFCCC) meetings continued in Bonn, Germany from 9 – 11 April 2010. This marked the eleventh session of the Ad Hoc Working Group on Further Commitments for Annex I Parties under the Kyoto Protocol (AWG-KP 11) as well as the ninth session of the Ad Hoc Working Group on Long-term Cooperative Action under the Convention (AWG-LCA 9).

The meetings were focused on the organization of each of the working groups in the coming year. The main goal was to prepare for a successful conclusion of the groups’ work during the upcoming Conference of Parties (COP) 16 in Cancun later this year.

During the three day meeting there was much reflection on the COP 15 negotiations which took place in Copenhagen last December. Criticisms of COP15 have been extreme in the past months. At the Bonn meeting, 10 April, Pablo Solon, Bolivia’s ambassador to the UN, condemned what he called “continued attempts by some developed countries to impose a deeply flawed Copenhagen Accord as the basis for future negotiations.”

In order to combat the failures Solon has identified in the process, Bolivia will host the World Peoples’ Summit on Climate Change and Rights of Mother Earth on 19-22 April 2010. More than 15,000 people and 70 governments are expected to attend. The object of the Summit is to bring “civil society back into the process of climate change negotiations.”

In the wake of COP 15 there has been a call from many developing nations towards more industrialized ones for increased trust. To this point, at a press conference, Solon called for a return to the full UNFCCC process, and to strengthen what had been agreed in COP15. He stated that “the central aim of any climate summit is not to save itself and accept any outcome, but to come to an agreement that will save humanity.”

In the wake of criticism and the launch of the World Peoples’ Summit, the USA has begun to slice millions of climate change support dollars from Bolivia. These cuts in funds were not stated as being directly related to the Summit launch. However, funds are also being cut from Ecuador, which is the first nation to recognize the legal rights of Mother Earth. Commenting on the cuts in funding from the USA and Denmark, Solon commented: “what kind of negotiation is it where you lose money if you disagree?”

Only time will tell if the actions like the World Peoples’ Summit on Climate Change and Rights of Mother Earth will affect the goals and tone of COP 16.

The body charged with the administrative oversight of the United Nations’ Clean Development Mechanism (CDM) is showing signs that a critical transition in the technical framework may be coming.

The CDM Executive Board (EB); currently the judge, juror and executioner of the Kyoto Protocol’s cornerstone carbon offsetting mechanism, could receive a much needed shake up, and not a minute too soon.

CDM-EB Meeting

Pressure Points

The demands from the mechanism until the end of 2012 are sure to be intense as the UN (and its climate policy body, the UNFCCC) are placed under pressure to deliver on international climate policy.

Providing the framework to extend the life of the CDM beyond 2012 is one of the crucial outcomes required from UNFCCC negotiations.  The lack of any concrete resolutions on this matter from Copenhagen in December did little to allay the vast uncertainty that currently resides in the CDM.

Without the Kyoto framework, which technically ceases to exist from 2013, the CDM is in danger of failing simply because of regulatory and political uncertainties.  In order to survive, the challenges in the next few years need to dealt with head on if expectations are to be met, and criticism subdued.

Meeting the Challenge

The EB’s recent 52nd meeting (taking place approximately every six weeks) was the first one following December’s negotiations.

Among the usual list of actions which required their attention (project approvals, issuance reviews, methodology considerations, etc.) were a wide range of important topics that had to be considered; including appointing a new chair and vice-chair and establishing an independent committee to assume technical responsibility for project approvals et al.

The EB was also urged to speed up processes and to increase the volume of emission reductions delivered from projects.  The daunting task to improve the overall time it takes projects to enter the pipeline and issue the all-important Certified Emission Reductions (CERs) falls to one person.

Clifford Mahlung, lead climate negotiator for Jamaica, was promoted from vice-chair to resume control of the EB during what will arguably be the most important two years of its existence.

The proposed improvements are anticipated to increase the scope and scale of the CDM, especially in terms of volumes of CERs issued and the regional distribution of the projects to countries that are yet to benefit from the CDM.

Balancing Point

Mahlung is expected to steer the CDM towards equilibrium of the three central inputs to any project-based mechanism: quality, time and cost, whilst ensuring the emission reductions in the CDM remain environmentally credible and uphold the integrity of the mechanism.

In an effort to reduce the time it takes projects to move through the milestones in the CDM pipeline, which has been the main drawback experienced to date, Mahlung is hoping to adopt a more automatic approach to project approvals.  However, the detrimental impact this may have on the quality of emission reductions and cost of projects needs to be accounted for.

The EB has so far been overwhelmed by the administrative demands on its members.  So the introduction of a Project Assessment Committee (PAC), a group of 12 technical experts, is expected to lighten the load on the EB from its technical approvals and reviews.

Whether this proposal aids processes, or merely increases the depth of bureaucracy in the CDM by adding another committee into the mix, remains to be seen.

In any case, signals of technical improvements could be just what potential participants are looking for.  There was a danger that a lack of clarity surrounding the CDM after 2012 was severely stifling potential investment.  After all, when the outlook for a healthy return on investment is uncertain, investors will be understandably discouraged.

Positively, what Mahlung has quickly accepted is that until the ‘post-2012 problem’ is figured out on the international arena, his immediate responsibility lies with improving the CDM now.  The opportunity for underlying growth in the CDM before the 2013 Kyoto deadline is considerable, but is matched in size by the challenges ahead.

As ever, time will tell whether Mahlung is up to the task.

Wind farm in Africa (Image by: lollie pop)

The United Nations’ Clean Development Mechanism (CDM) adopted a novel project approach to countering or offsetting developed countries’ emissions.  The most visible and controversial component of the Kyoto Protocol has made large political and regional advances since its inception.

However, when it comes to global distribution of the projects that are actually generating carbon offsets, it falls short.  Nowhere has this been felt more, than on the African continent.  But why should this be the case when the CDM was designed to be a means to transfer technology, finances and development to the poorest and most vulnerable countries on the planet?

Reasoning a Failure?

The barriers of CDM expansion in Africa surround emission reduction potential, financing and institutional stability.

Africa’s contribution to global emissions is minimal; UN data estimate that Africa accounts for only 4% (1,500 million tonnes of CO₂ equivalent) of annual world emissions.  Stunningly, 75% of Africa’s emissions originate from just four countries (Algeria, Egypt, South Africa and Nigeria).

Consequently, the carbon mitigation potential in the remaining 49 countries is clearly small.  Per capita emissions in sub-Saharan Africa are the lowest in the world at 0.77 tCO₂(e).  Relatively speaking, the financial costs that accompany these potential mitigations are more expensive than anywhere else, so why would a project developer choose an African country to invest in when better and faster returns can be sought elsewhere?

Potential From Nothing

In spite of the obvious low attribution to Certified Emission Reduction (CER) volumes generated so far in CDM projects on the continent, there is a potential for substantial growth.

A study commissioned by the World Bank, detailed the possible emission reductions which could be actualised by a mechanism such as the CDM.

Key areas include: fuel shifting, improved agricultural processes and industrial energy efficiency schemes.  Importantly, the CDM can accommodate these reduction areas – with small-scale renewable schemes and process changes being effectively undertaken within the CDM.

As it stands, only 120 projects are hosted in Africa; of that, only 65 are in 20 sub-Saharan countries.  It has been estimated that up to 3,000 CDM projects can be hosted in Africa – there is a great deal of development left to be done.

One setback is that a country must have a Designated National Authority (DNA) before any CDM project can be contemplated.  This body is responsible for the regulation of CDM projects in their country.  Unfortunately for most sub-Saharan Africa, there are only 21 DNAs, meaning that many reduction opportunities are missed.

Overarching responsibility for tackling this dilemma ultimately lies with the CDM’s administrative body, the Executive Board (EB) and the UNFCCC.  Only recently has any real progress been made with respect to this.

Delivering the Mechanism

The difficulty is that the CDM has been poorly refined for the special considerations that African countries require.

What progress they made was acknowledged at the UNFCCC negotiations in Copenhagen in December 2009.  Regional distribution was only briefly discussed (mainly due to limitations of actual negotiating time) but it was agreed that the DNA registration requirements would be reduced in countries that have difficulty hosting projects.  The reforms are expected to come into force sometime in the second half of 2010.

A CDM concept that is expected to benefit Africa received little negotiating time also.  It is thought that the programmatic CDM (pCDM), or sometimes known as a programme of activities (PoA), could unlock the delivery potential of the CDM in Africa.

In an effort to reduce transaction costs and generating bigger revenues by facilitating larger economies of scale, the pCDM approach would gather a group of similar emission reduction schemes under the umbrella of one project.  Consequently, this could provide an opportunity to tackle small-scale project barriers.

The number of pCDM projects that have progressed is small, but there are some that have the opportunity to generate substantial emission savings in other developing countries.

The same opportunity exists in Africa.  The pCDM concept could resolve some challenges that currently bedevil the African CDM.  However, a large set of barriers still exist before the pCDM can really live up to expectations – including risks associated to the lack of administrative clarity of the pCDM, high upfront costs and lack of successful experience implementing these unique schemes.

So Africa’s CDM potential categorically exists, but toil is required before it can compete with the emission reductions that are possible in the cheaper and more accessible countries such as Brazil, India or China.   Once unlocked though, the CDM could evolve into the flexible mechanism that was anticipated from the very beginning.