Durban: Stocktaking of CDM and Carbon Markets

by Payal Parekh

The first week of the negotiations in Durban at the UN Climate talks are over, so it is a good time to take stock of new developments in the negotiations as they relate to the Clean Development Mechanism (CDM) and new market mechanisms. It’s been a busy week, since issues related to the CDM are discussed under the Kyoto Protocol negotiating track, as well as two technical wings, Subsidiary Body for Implementation (SBI) and and Subsidiary Body for Scientific and Technological Advice (SBSTA). New market mechanisms are discussed under the Long-term Cooperative Action (LCA) track.

KP Track

The focus of discussions under the Kyoto Protocol (KP) track are on securing a second commitment period to the Protocol, the only legally binding agreement to reduce greenhouse gas emissions that recognizes that developed countries must take the lead in combating climate change and must do their fair share. Here the major discussion has been the fate of the CDM if a second commitment period is not secured. Developing countries have made it clear that if there is not a second commitment period, there is no CDM.

Unfortunately developed countries would like to have a new climate agreement; not because they want to improve some of the shortcomings of the Kyoto Protocol, but because they want to have weaker obligations placed on them in the fight against climate chaos and want to shift the burden to developing countries. Yet, they want to continue to have access to the CDM, which is a part of the Protocol. Considering that developed countries have only pledged to reduce their emissions by 13-18% below 1990 levels by 2020, no where near the science-based demand of 40-50% below 1990 levels that over 130 developing countries have called for, there is no need for offsetting. It is unlikely that developed countries will have to take any action to meet these paltry reductions.

A number of African countries lamented the lack of projects in Africa and welcomed quicker implementation of suppressed demand and standardized baselines. African countries also stressed the importance of capacity building.

LCA Track

Under the LCA track, developed countries are keen to see the expansion of carbon markets. Given weak targets and the poor performance of the CDM, it is not clear why carbon markets are so important to them – perhaps out of ideological pride?

The EU would like to see new mechanisms created under the UN, otherwise they believe that we will be fragmented and inconsistent. The EU has also made it clear that this is a core demand if they are going to commit to a second commitment period under the KP track. On the other hand, New Zealand doesn’t think that that rules and procedures for new market mechanisms need to be established under the UN. Rather they want to see that there is linkage between the number of bilateral and national trading schemes that are being traded. Australia has for example is establishing a carbon trading scheme with the passage of a law to regulate emissions just recently. Other countries such as Japan are developing their own offsets scheme.

SBI

The SBI has been tasked with the development of an appeals procedures for decisions made by the CDM Executive Board. Parties have not been able to come to an agreement on whether only rejections can be appealed (clearly to the delight of project developers). The EU would like to task SBSTA with carrying out a study to assess the impact of allowing all decisions to be appealed.

SBSTA

As the name implies, SBSTA deals with a number of technical issues.

With regards to the CDM, SBSTA has been focusing on the inclusion of carbon capture and storage (CCS) into the CDM, implications of including reforestation of lands with forest in exhaustion as an approved project type under the CDM, allowing new HFC-22 facilities to get registered under the CDM, and a materiality standard under the CDM.

A decision draft text has been forwarded on materiality, while crediting of new HFC facilities and forest in exhaustion projects have been punted to future SBSTA sessions.

The big issue though that civil society has been considered about though is the draft decision on modalities and procedures for carbon dioxide capture and storage (CCS) as a clean development mechanism project activity. Last year when CCS sneaked its way into the CDM, many people thought that it would take quite a while for SBSTA to work out the procedures and modalities for its conclusion; unfortunately things have moved quickly and the draft decision doesn’t look good. There is not any agreement on who should take over the long term liability of CO2 waste sites. Nevertheless this draft decision text may be forwarded to ministers for debate and discussion next week. Public participation and transparency requirements are weak and independent entities are not required to carry out assessments.

Finally, the CDM Executive Board had a side event on Saturday launching its public dialogue on the CDM. Inputs on the scope of the dialogue can be submitted until 16. January 2012.

Stay tuned to find out how the talks progress next week on all issues carbon market related.

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