Love for CDM could continue into 2015 and beyond… But this time who loves it, developing or de

by Surya Karki

According to Annual Report of the Executive Board of the Clean Development Mechanism (CDM) to the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol, it has come through another difficult year. The main challenge facing the CDM remains the low level of demand for the certified emission reductions produced by CDM registered project activities and programmes of activities, due ultimately to Parties’ level of ambition to reduce greenhouse gas emissions. And as there wasn’t a mechanism to address the overflow and low demand of carbon credits, the overwhelming supply of CER units has driven the demand and carbon prices down.

The report also states that the number of CDM projects carried out has dropped drastically in comparison to 2005 levels. Since its establishment, the CDM has 7300 projects registered in 94 countries, making it the only mechanism to have implemented projects in several countries. Among the 7300 CDM projects, many have been implemented in countries that already attract the lion’s share of foreign direct investment (FDI), like China and India among others.

While the “C” in CDM stands for “Clean,” the definition of this word is so vague that even “clean coal” projects can be part of it. The astonishing fact is that most CDM credits are made up of “clean coal” project credits. Thus, through this mechanism there is no actual CO2 emission reduction. The “reduction” in CO2 gases from CDM projects, which are counted as credits towards mitigation commitment for the implementing country, is a demonstration of false mitigation commitments by Annex I parties.

The mechanism also claims that the projects implemented have improved sustainable living, created employment, and helped reduce 1.4 billion ton of CO2. But if one was to analyze the report, the projects have mostly been carried out in rapidly developing economies, especially India and China, the most vulnerable communities haven’t benefitted as much as the CDM report claims to have done.

But despite all the flaws, loopholes and visible problems in the functioning of the mechanism, the second commitment period of the Kyoto Protocol didn’t address the issue of supply and demand of CERs in CDM registry, putting the whole mechanism under threat of extinction. Is that bad? Yes it is bad, because the only fund that is completely dedicated to funding adaptation projects in developing countries, the Adaptation Fund, is under threat as a result.

Thus at the 19th COP/ 9th CMP, the CDM report recommended 22 possible changes, which were discussed in a room filled with jokes, giggles, laughter and chocolate, unlike other negotiating rooms. With the current situation of low CER demand, there is little to no hope that new clean development mechanism projects to reduce GHG are going to be registered in the near future. And to address the issue of low demand for CDM CERs, one possible route put forth by the CDM board to is voluntary cancellation of CERs in the CDM registry.

So, Why is the fight for CDM survival still going on? Who is interested in having the CDM? Surprisingly this time around, developing country Parties are the ones fighting to keep a market based mechanism like the CDM. Yes, developing countries, especially LDCs. Why? The reason is straightforward: money and development. Money for adaptation, and money for sustainable development projects at a time when climate finance is non-existent.

Thus, interest from many developing countries has pushed for a possible consideration to implement CDM as part of the 2015 agreement. According to reports and recommendations from the CDM Board, it is highly likely that an improved version, with the 22 recommended changes from the report, of CDM might come into force under the COP in the 2015 agreement.

If parties are to take CDM into consideration for the 2015 agreement, serious amendments must be made.The CDM is mandated to “promote equitable geographic distribution of clean development mechanism project activities at regional and subregional levels.” But if CDM investment flows to business-as-usual projects, then it is most likely that countries that attract the lion’s share of foreign direct investment (FDI) will benefit the most while those who miss out on FDI will watch from the sidelines. Thus, the new guidelines should guarantee that the most vulnerable countries, LDCs and AOSIS, should get priority in terms of CDM projects and new investment. The CDM must ensure new and additional projects, avoid double counting of the credits, increase the carbon price and subsequently grow the adaptation fund.

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