AFRICA CARBON FORUM ABIDJAN COTE D IVOIRE

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1 AFRICA CARBON FORUM ABIDJAN COTE D IVOIRE 2 au 5 juillet 2013 CDM: Achievements, Lessons Learnt Future of the CDM Kadio AHOSSANE, CDM_EB Alternate Member

2 CONTENT I. INTRODUCTION II. ACHIEVEMENT III. LESSONS LEARNT IV. FUTURE OF THE CDM V. CONCLUSION

3 INTRODUCTION (1) The clean development mechanism (CDM) allows emission-reduction projects in developing countries to earn certified emission reductions (CERs), each equivalent to one tone of CO2. CERs can be traded and sold, and used by industrialized countries to meet a part of their emission reduction targets under the Kyoto Protocol. There are more than 4370registered CDM projects in75 developing countries. To date, more than970 million CERs have been issued. There have been numerous publications on different topics related to the CDM, namely the environmental integrity and economic efficiency of the mechanism, its baselines andadditionality, thecontroversy around its contributionto sustainable development and the protection of human rights to name only a few.

4 INTRODUCTION (2) With the end of the first Kyoto commitment period ( ) approaching, it is high time to review and to summarize the key lessons that can be drawn from more than 10 years of experience With the CDM. Although the fate of the CDM and its role in the future climate regime remains uncertain, the lessons derived in this presentation may prove tobe useful not only for the CDM reform, but also for new mechanisms, such as NAMAs, REDD+, sectoral crediting or bilateral agreements, as well as the New Market Mechanism, which was discussed during negotiations in Durban in December As the Green Climate Fund is still wondering how to raise the pledged 100 billion dollars until 2020, the CDM recipe for attracting private investments in the billions of euros per year to climate action is worth some attention.

5 ACHIEVEMENTS With over 4500 registered projects in developing countries, the Clean Development Mechanism (CDM) is by far the largest carbon offset mechanism in the world. It is also the only multi- billion euro global market based on an environmental commodity and supervised by the United Nations. As of September 1st, 2012, it had already generated over a billion carbon credits (UNFCCC 2012) and is expected to generate million credits by April 30th, 2013 the date of surrendering credits for the compliance for the second phase of the European Union Emissions Trading Scheme (EU ETS) according to the model developed by CDC Climat research The global volume of the Certified Emissions Reductions (CER) primary and secondary market reached 16 billion euros in 2011.

6 OTHER ACHIEVEMENTS Leverage of Clean Energy Investments: 41 US$ billion of investment in 2008 Wider participation of countries (64 out of 153) Culture of monitoring in developing countries Development of databases Policies and regulations that impact positively the sustainable development of key sectors

7 ENHANCEMENT OF THE EFFICIENCY More client oriented approach Meaning of Performance for products/processes Establishment of KPI Monitoring of the KPI and CA Quality gate at earlier stages Reduction of hand-over More interaction with PPs Elimination of steps not adding enough value Establishment of timelines for validation

8 BROADENING OF THE CDM SCOPE TO MORE SECTORS/REGIONS Top down development of methodologies Payment of fee deferred until the first issuance DOEs encouraged to cover under-represented countries Prioritization of consideration/development of Meth Simplified modalities for demonstrating additionality Use of conservative default parameters PoA: revision to clarify the issue of liability of DOEs These positive discriminations in the regulation are needed and welcomed However, they should be complemented with actions to enhance the competitive advantage of under- represented regions to attract CDM private investors. For that purpose, one solution is to use public international finance to leverage the private investments

9 ACHIEVEMENTS Data as of: 31 May 2013 Number of CDM project activities that have issued CERs: CERs issued CERs to the end of the 1 st KP commitment period (31 Dec Potential supply of: CERs to the end of 2015 CERs to the end of 2020 CERs to the end of all current crediting periods ,334,898,773 1,833,196,335 2,876,504,442 3,430,425,693 3,442,169,909 Adjusted by past rate of issuance 1,462,231,423 2,248,928,937 2,644,322,361 2,652,758,743

10 Potential supply of: ACHIEVEMENTS Number of CDM project activities CERs to the end of the 1 st KP commitment period (31 Dec. 2012) CERs to the end of 2015 CERs to the end of 2020 CERs to the end of all current crediting periods 7569 of which: 2,205,855,365 4,728,824,329 7,595,765,608 8,061,619, are registered 96 are requesting registration 517 are pending publication 56 are review requested 2 are corrections requested 2,195,620,917 4,463,984,854 6,764,251,900 7,017,032, ,285 31,530,290 94,837, ,280,366 9,056, ,072, ,250, ,663,193 92,433 20,871,438 72,649,853 93,867, ,766 1,365,366 1,775,849 1,775,849

11 Geographical distribution of CDM projects registered by September 2012 For instance, the distribution of CDM projects has largely been concentrated in two continents: Asia and Latin America. Only 2.5%of CDM projects have been established in Africa, and the dominant project types are HFCs and N2O projects, with half of all HFC projects located in China.

12 LESSONS LEARNT (1)

13 LESSONS LEARNT (2)

14 LESSONS LEARNT (3)

15 FUTURE OF THE CDM A continuation of the CDM and JI for a balance between supply and demand for CERs by 2020

16 FUTURE OF THE CDM (2) The geographical composition of CDM projects has changed significantly. Until recently, 65% of the projects came from India and China. Now that has changed and there are many projects in African countries 69 projects in total. A year ago, there were only one or two projects in Africa. The major beneficiaries of the carbon trading system, however, remain China and India, followed by Brazil and Mexico. The CDM s future in South Asia is assured. It was a very uneven situation in the past as India was number two globally in hosting CDM projects and other countries in the region were absent. But in the last three years, the other Asian countries are picking up. Pakistan, which four years ago had only one CDM project at the Pak Arab Fertilizer plant, now has 9 or 10 registered projects, which is a significant jump. Bangladesh also has a couple now, as does Sri Lanka. South Asia s share has increased and other Asian countries are also gearing up. For CDM projects you need to have a vibrant economy that needs energy, robust infrastructure, a more conducive investment climate and dynamic entrepreneurs. If Asian countries want to benefit from the CDM they need to have more dynamic and active economies

17 CONCLUSION The Clean Development Mechanism (CDM) is the first and by far the largest carbon offset instrument in the world. To date, it is the only market based on an environmental commodity which managed to attract several billions of euros of private capital on an annual basis. Being the first-of-a-kind climate change mitigation instrument, the CDM followed a learning by doing pattern undergoing numerous reforms throughout its more than 10-year history. Although the post-2012 fate of the mechanism remains uncertain, one should not throw out the baby with the bath water as the lessons from the CDM experience may be useful not only for the CDM reform butalso for new market instruments. The CDM has been successful in creating a dynamic carbon market that exceeded the expectations of the most optimistic players

18 CONCLUSION (2) It presents room for improvement. Fortunately, the regulatory body through its interaction with the stakeholders has identified and formulated the most important reforms it should undergo important reforms it should undergo Most of them have already been implemented, the remaining are under discussion at the CDM EB The full implementation of the reforms will prepare the CDM to continue to play a key role in any post 2012 regime

19 THANK YOU