Tomorrow’s Opportunities for CDM

Fourth workshop on enhancing the regional distribution of CDM projects in Asia and the

Pacific

4-5 Sep. 2013, Manila 4-5 September 2013, Manila

Gareth Phillips, Chairman Project Developer Forum

Tomorrow’s opportunities…..

Under the assumption that Governments do agree to do more

to reduce GHG emissions

Overview

What is the CDM / what is it designed to do?

Who is the CDM?

Opportunities come through change – what are

the drivers of change?

Where are the opportunities for the CDM as:

a mechanism; and

what it is?

Project Developer Forum

1) What is the CDM?

A flexibility mechanism defined under the KP with dual

objectives to help annex 1 Parties….

Think of the CDM as a:

Collection of open source procedures and tools

A means of transparently reporting verified results

A great way of undertaking national and international

stakeholder consultation

A cost effective means of delivering sustainable

development benefits

A repository of technical expertise in MRV of GHG

emissions from a wide range of sources

A way of financing new technology….

Project Developer Forum

2) Who is the CDM?

Parties to the UNFCCC and their DNAs

CDM EB

Secretariat

DOEs

Project developers

Investors

Buyers

Consultants / experts / advisors

Civil society and global stakeholders….

Project Developer Forum

3) What are the drivers of change and what

threats / opportunities do they present?

Regular EB meetings

Annual guidance from the COP

1st review of the CDM modalities and procedures

Demand arising from KP II commitments, domestic ETS

and overall level of ambition

NAMAs

FVA, New and Non market mechanisms

The Durban Platform with some form of legally binding

targets for all post 2020

Project Developer Forum

Regular EB meetings

Deliver ripples to the daily operation of the CDM

Occasional waves – e.g. current discussions on the

application of E- rules

Tends to result in more of the same – complexity and

detail

May create specific and small opportunities for project

developers, service providers

Project Developer Forum

Annual guidance from the CoP

Annual, slow, seldom earth shaking but, for example,

created

PoA

Standards and Standardized baselines

Voluntary reporting of SD benefits

Has resulted in more substantial opportunities over the

medium term particularly for project developers, service

providers, DOEs etc but currently most significant issues

diverted to review

Rarely impacts upon the CDM as a mechanism

Project Developer Forum

1st Review of the CDM Modalities and

Procedures

Much more far reaching and of great significance for the

CDM as a mechanism and hence impacts all

stakeholders

Potential to change the face of the CDM

PD Forum has been lobbying hard to convert the

CDM into a mitigation instrument

Other issues pushed to the review include significant

deficiencies, appeals, independence of the EB, crediting

periods – opportunity to complete the design of the CDM

and turn it into a mature instrument

For negotiation in Warsaw, time permitting (SBI)

Project Developer Forum

Demand

Currently lacking. Prospects for new demand?

KP II targets currently do not create any significant additional

demand but opportunity to revisit targets in 2014

ETS – EU unlikely; China could make a big difference; Korea,

Kazakhstan, Chile, Mexico….

CDM could act to link new ETS

Development of national standards for emission reductions

could undermine demand and hamper linkage (but could

create more diversity in standards and arbitrage opportunities)

Sovereign buyers – limited interest

Multinational fund / capacity fund…..

Increased demand for CERs would breath life back into

the CDM as a mechanism (but buyers won’t choose the

CDM if the quality is not what they seek)

Project Developer Forum

NAMAs

Flexible and undefined = unrestrained opportunities?

Registry and some funding initiatives in place

Domestic, supported and crediting NAMAs broadly

recognized

Supported and Crediting NAMAs could include policy

driven CDM style initiatives

Buyers / donors may be more receptive to CERs or

verified results delivered via a NAMA

Should create opportunities for project developers,

service providers, financiers, DOEs etc.

Project Developer Forum

FVA, New and Non-market

mechanisms

All currently under negotiation

Potential to create significant change

Introduce competition – could erode demand for CERs

The New market mechanism will need to address

additionality, MRV etc

Non-market mechanisms may be more suited to certain

sectors e.g. transport, agriculture

Creating demand for CDM expertise…..

Could also trigger changes in CDM as a mechanism (if

not delivered via review)

But overall, should result in an expansion of emission

management initiatives in economies across the world

Project Developer Forum

Durban Platform ….another legal instrument or an agreed outcome with legal force

under the Convention applicable to all Parties

Should result in growth in compliance driven emission

management activities with associated MRV

Should expand emission management to all sectors of

the global economy

Should trigger increasing amounts of preparatory work,

capacity building, trial schemes, advisory services and

debate….

Creating opportunities for stakeholders across the board

But remains subject to political progress up to 2015

Project Developer Forum

Opportunities for CDM as a mechanism

13

Global emission of GHGs in

2050

6 Bn tonnes

95% captured under

mechanisms

Fossil Fuel emissions

from stationary sources

(X%)

Agriculture,

Land use , transport

and others

(Y%)

Non-CO2 emissions

(Z%) Projects in LDCs,

Disorganized sectors e.g.

Household emissions, EE

Implemented via CDM/JI

Emission reductions via baseline and credit

in project based mechanisms e.g. CDM and

JI

Allowances, issued under ETS and sectoral

level market based mechanisms

Market base

mechanisms covering

all stationary sources

of

Combustion and

process

CO2 emissions, via

international

Caps or New Market

Based

Mechanism

Non-market based

mechanisms

Covering CO2

emissions

From mobile

sources,

Forestry and land

use, small sources,

households etc

Non CO2 via

Laws and

International

treaties Non-market based mechanisms – taxes and

grants, performance standards etc

Compliance with international treaties / law

Threat and opportunities for CDM

stakeholders

Project Developer Forum

CDM EB

Annual

guidance

Review of the

CDM M&P Demand NAMAs

FVA new and

non MM

Durban

Platform

Existing

investors?

New investors

PD

Consultants

Advisory

services

DOEs

DNA

Governments

MLB and

institutions

Stak

eho

lder

s

Drivers of Change

Conclusions

Tomorrows opportunities for the CDM are

related to what the CDM is, not what is was

designed to do

Emission management initiatives as we know

them (i.e. CDM projects) are facing more threats

than opportunities

But the prospects for new initiatives, have

seldom looked more exciting and never offered

more opportunities

Project Developer Forum

Thank you for your attention

The Project Developer Forum (PD-Forum) is a collective voice to represent the

interests of companies developing greenhouse gas (GHG) emission reduction

projects in international markets under the Clean Development Mechanism

(CDM), Joint Implementation (JI) and other carbon emission reduction schemes

and programs.

See our members at: www.pd-forum.net

Project Developer Forum