Harnessing the potential of the CDM für closing the pre-2020 gap

LACCF Po6

September 05, 2014

Bogotá, Colombia

Thomas ForthAdvisor to BMUB, Division KI I 6European and International Climate Policy, New Market Mechanisms

CDM status I

• CDM has demonstrated its capability as a project-based mechanism to set incentives for additional emissions reductions

• The contribution to combat climate change is significant• Almost 1,5 billion CERs issued• More than 7.500 CDM projects• A theoretical potential to generate 8 billions CERs until

2020• But it is unlikely to reach this number under actual

political conditions

CDM status II

• CDM has worked in the political margins of its original intension

• Providing certificates in a cost-efficient manner for AI• 3,6 billion USD cost saving • Raising investments in Non Annex I – countries

contributing to sustainable development • 215 billion USD on the investment side• High co-benefits (more than 600 USD / CER)

CDM status III

• The question is only why the CDM is put on risk• The answer is simple and crude:

the readiness for taking adequate commitments on emission reduction is lacking since 2009

• As consequence some relevant groups are thinking the time for the CDM is over and reform is not needed

• The real consequence is only that we could loose a well implemented mechanisms with well functioning institutions, good governance practice, a bulk of useful technical tools and a broad understanding of the functioning of this mechanism on the user side

Reasons for the CDM pre-2020

We need a CDM reform best before Paris! •To define the role of markets in new climate agreement we should the progress on consensus building in the negotiation; the CDM reform is clear and ripe and useful for direct use•CDM is not only a technical tool for result-based financing; using the CDM cycle ensures good solution for accounting rules, especially for avoiding double counting and claiming•The CDM is also a useful tool for emerging domestic scheme; one should refrain from inventing new certificates for domestic market mechanisms

Reasons for the CDM pre-2020 II

• Furthermore the CDM is a good solution for the FVA; the use of the CDM will reduce the complexity of the growing fragmentation of the carbon market

Classical function of the CDM before 2020• The CDM is still a usefull mechanism for the primary

market, even if the demand is low;• There are reasons to hope for an expanded demand• As it is the key question of this plenary the CDM could

provide the international co-operative fundament for closing the pre-2020 gap

• If we get the historical level of demand we have a chance to harness the 8 billion CER potential

Reasons for the CDM pre-2020 III

• There are reasons to work on this challenge• The ambition raising debate is still ongoing under KP CP

II• The question is which other ways re on the table to raise

the ambition to the necessary level for closing the gap?• Only domestic policies?• First step on this road is the mobilization of money to

help good CDM projects survive without sufficient private demand

Reasons for the CDM beyond 2020

• The CDM has only a chance, if we reach consensus of the function of the CDM beyond 2020

• Which functions are realistic?• Main market mechamisms for certain countries (LDC, low

income countries)• CDM could be the module under a new market mechnisms

for including an active role of the private sector• The understanding of the actual debate of the CDM reform

should not be: this is the last step before phasing it out• The CDM as bottom-up uncomplete mechanism is a reform

mechanism from the very early start

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THANK YOU FOR YOUR ATTENTION

Thomas Forth

Thomas.Forth@bmub.bund.de

Office: +49 30 18305 3668