By Climatico Contributor: Roddy Boyd

Indian CDM biomass

Indian CDM biomass (Source: UNFCCC)

The world’s largest carbon offset instrument made wholesome, if not stunning or substantive, progress at Durban’s 17th Conference of the Parties. While Canada still faces considerable backlash from the hype surrounding its potential exit from 1997’s Kyoto Protocol, the EU has (at the time of writing) gathered more than 130 countries to sign on to its ‘roadmap’ to sign a new legal treaty by 2015. 

Participants of the UN’s Clean Development Mechanism have been following the negotiations closely as they expect any post-2012 uncertainties to be cleared up. As the COP continues into the weekend, the EU’s negotiating text outlines that a legal (non-binding) compliance period would start in 2020, but was deemed unacceptable to US, India and China: the latter refusing to accept the implied death of the KP. With several negotiators explaining that the CDM will die if the KP does, will wholesome progress alone save the CDM for 2012?

Post-2012 Supplementarity

New market mechanisms have been a point of attrition for many days of negotiations, as some view the CDM as a success that can be built upon, instead of replaced. In the AWG-LCA, negotiation texts for market mechanisms have been bogged down in procedural divides between countries that feel it is too early for new mechanism substance discussions (e.g. US), to those who feel they are necessary before gaining any second commitment period (e.g. EU). It appears that this discussion will continue throughout 2012 sessions.

Two important reasons for arguing against the CDM without a second commitment period have been suggested by law firm Baker & McKenzie: the politics behind developing countries wanting developed countries to sign up to further targets, in opposition to the latter wanting some of the former to do the same; and hints that the value of the CDM to these large developing economies is perhaps becoming clearer.

In its truest form, the CDM enabled developed countries to seek out emission reductions from other countries to be used against their targets – a process called supplementarity. The process automatically sought out the ‘lowest hanging fruit’; the cheapest and easiest reductions. Over time, this may become a stumbling point when the host country wants to undertake some emission reductions themselves, since the CDM has already brought to market the easiest reductions at the lowest cost. This means that Brazil, China and India (who have the most vested interest in the CDM) may have to undertake more costly abatement options at their own expense: an idea that has presented itself with the difficulty in extending the CDM without the KP. However, when these three countries host approximately 70% of all projects with US$160 billion total investment, many others have not had the same opportunities.

Food for Thought

One of the technological successes to come out of Durban has been the inclusion of CCS in the CDM, a discussion that has continued for some six years and not without controversy. The largely untested technology is seen by many to be against the principle of the CDM, by allowing carbon intensive industry and power sectors to continue without alternatives. Negotiations in Cancun at last year’s COP accepted CCS into the CDM, on the condition that a ‘shopping list’ of modalities and implementation issues are addressed. One of which forces project developers to hold back 5% of the offsets for ‘leakage’ purposes. An expert from Greenpeace explained that this agreement “is the weakest possible” since they were pushing for 20%.

Meanwhile, EU negotiators have been vocal on eligibility of offsets from the CDM and JI. Firstly, the EU asked the UN to officially review whether large-scale projects such as large hydro and ‘clean’ coal power plants should be able to benefit from the CDM – more expected on this next year. Secondly, Russia failed to negotiate an assurance that JI projects registered after 2012 will still be eligible to generate ERU offsets. Point Carbon quoted an anonymous source that explained this would give the EU an opportunity to impose further post-2012 EU ETS quality restrictions that they already have in place.

The End

With only one Kyoto year left, the Executive Board leaves with an ambitious work plan – an appeals process for both positive and negative decisions, stakeholder consultations at global and local levels, and the formalities to set up an independent review panel. Some are viewing the length of the list to be positive sentiment to the continuation of the CDM. But because of references implying the CDM in a post-2012 world, the COP was unable to move forward on the EB guidance document, and instead has left the decision to the next informal negotiations taking place in the first quarter of 2012.

As we move towards the end of COP17, Durban appears to have built on unexceptional operational successes from the modest Cancun and Copenhagen negotiations, especially with regards to the CDM. The fate of the CDM, however, still remains cloudy due to legal repercussions if the KP ends with no replacement commitment period: uncertainties which have been remarkably consistent throughout the two weeks.

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