Carbon Pricing Instruments: Options for Latin America and the Caribbean

John Kilani, Director, UNFCCCSustainable Development Mechanisms

Latin American and Caribbean Carbon ForumBogota, 4 September 2014

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One ton of CO2 reduced

One ton of CO2 recognized as

one carbon unit issued

Carbon unit transformed into carbon

asset

The Dual function: MRV instrument and pricing instrument

MRV instrument: generation of the carbon unit Pricing instrument: Incentive that gives

value to the carbon unit making it become a carbon asset

CDM M&P KP rules, GCF rules, RBF rules, jurisdiction’s rules

CDM as a MRV tool governed by the CDM regulatory body : CERs are generated following requirements of the CDM M&P and one ton of CO2 is one ton of CO2 regardless of (i) its abatement cost , (ii) what the CER will be used for, (iii) the incentive and (iv) the conditions of purchase and sale

The pricing instrument give value to the carbon unit that become a carbon asset: as a commodity, the carbon asset can have different values and can be used for different purpose, e.g. for compliance under the KP or for cancellation under RBF programmes, including GCF.

Need for greater clarity on these two functions of carbon market mechanisms

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• Some RBF programmes/initiatives are already beginning to see the need

of combining the CDM, as a credible and readily available MRV

instrument, with their specific pricing instrument, for prompt action

• Some donors countries are supporting such combination to ensure

efficiency, effectiveness and recognition and to fill the pre 2020 gap, with

the enabling of cancellation of the CERs

• CP.19 further enhances the MRV role of the CDM by inviting Parties to

promote the voluntary cancellation of CER, without double counting, as a

means of closing the pre-2020 ambition gap.

• This has created the basis for realizing the CDM’s full potential by

promoting the use, as an MRV tool, that can also serve the Convention

Unleashing the CDM potential

Thank you!