CDM: Open source for pre-forming a future mechanism Malin Ahlberg

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2 CDM: Open source for pre-forming a future mechanism Malin Ahlberg 4 th workshop on enhancing the regional distribution of CDM projects in Asia- Pacific Session 4: CDM: The future we want German Emissions Trading Authority / German DNA 04 th September 2013, Manila 2

3 Future of the carbon market Fragmentation of the market: In the first CP the Kyoto Protocol was the platform for a global carbon market with three different currencies (AAU, CER, ERU). Future: Increase number of offset standards: NMM and credited NAMA? Different national or regional offset standards 3

4 Chance and Challenge Chance: Button-up development of domestic ETS - optimistic outlook for the global carbon market and thus a light in the tunnel for the offset market. Challenge: Comparability of offset standards will be more complex in future. Important for Linking: creation of widely fungible credits based on comparable offset-standards. 4

5 Reformed CDM: Bridge between different Systems? CDM has been criticized with regard to the additionality, bureaucracy, high transaction costs, and unequal distribution. Valuable CDM reforms: Standardized baselines, PoA, Micro- Additionality and positive list, governance improvements. What may enhance the CDM chances of being allowed to be used for compliance in emerging and existing ETS? 5

6 Research study: Comparison of offset provisions German Emissions Trading Authority commissioned research study: Prospect for the CDM in a post 2012 carbon market. Conducted by Adelphi research and Wuppertal Institute. Study on offset policies in Australia, California, Japan and Korea: Approach take in development of new offset designs Reflect political context, views, needs Reaction to CDM shortcomings 6

7 Outcome of the study Common dominator: Advanced standardization All analyzed jurisdictions explicitly reject the project-byproject approach to additionality and baseline setting. Ex-ante additionality assessment: More efficient, costeffective, higher degree of environmental integrity. Standardise monitoring by providing approved monitoring report spread sheets. 7

8 Further findings CDM as open source for methodology development: Emerging systems often borrow methodologies and appraoches from the CDM for their domestic offset approaches. The bottom-up approach has therefore to a great extent facilitated the development of top-down systems. But, the centre of innovation is increasingly shifting away from the CDM as other schemes are able to move faster than the multilateral system. 8

9 Future potential of CDM Advantages of a common global offset standard: Comparability and no need for coordination in order to avoid double counting. One single infrastructure including the support structure of the UNFCCC (e.g. capacity building) More transparent for the market and different schemes may overburden host country s DNAs. How should the CDM be developed in order to maintain the advantages and to overcome its shortcomings? 9

10 Future potential of CDM Pursue with the reform efforts of the CDM: Standardized approaches may increase the efficiency of the CDM while ensuring environmental integrity and thus CDM might get more attractive for emerging ETS. SB is a vital milestone for more encompassing MRV systems, beyond the CDM. Standardized approaches within PoA might open the CDM to untapped sectors and regions which unlikely will be addressed by a cap of an ETS. 10

11 Bridge to new mechanism SB may serve as an appropriate approach to establish a sectoral baseline and thus to serve as an validated benchmark for NMM or NAMA development. Some design and implementations elements of PoA based on SB could easily be scaled-up to NAMA (eligibility criteria, accounting tool for a sector, project organization). PoA may support and complement the implementation of new policies in host countries. 11

12 Conclusions Recommendation: Work towards next climate regime and be ready when the next agreement enter into force. Provide institutional capacities for accounting in order to attract donors for climate projects. Implement PoA with standardized approaches in order to gain more practical experiences with scaled-up CDM. 12

13 Germany s activities to foster the carbon market Different tools of BMU to promote SB and PoA development: Environmental Research Plan (UFO Plan) International Climate Initiative (ICI) PoA Support Center Foundation Future of the Carbon Market (support of PoA) CDM/JI Initiative JIKO-Project Research and Public Information Services 13

14 Germany s activities to foster the carbon market Examples of projects: African Carbon Asset Development Facility (ACAD): Development of the SAPP GEF Cooperation with ETH DNA on capacity building for SBL and development of SBL for rural electrification which addresses suppressed demand. GIZ on behalf of the BMU is working on CDM in Uganda, amongst others on SBL issues in the biomass sector. Foundation Future of the Carbon Market is seeking to fund SB development in Asia-Pacific region. 14

15 Information materials : Prospects for CDM in Post 2012 Carbon Markets The CDM as Glue for the International Carbon Market? : Potential for standardized baselines for least developed countries CDM baseline approach for PoA up-scaling and New Market Mechanisms On the road from PoA to NAMA PoA Blueprint and other support materials Mitigating Climate Change, Investing in Development 15

16 Thank you for your attention! Malin Ahlberg Internet: 16

17 Back-up 17