The document summarizes lessons learned from the Clean Development Mechanism (CDM) under the Kyoto Protocol. It discusses how the CDM has facilitated greenhouse gas emission reduction projects in developing countries while promoting sustainable development. Over 5,600 projects have been implemented in 75 countries. However, the CDM process of validating and verifying individual projects has proven resource-intensive. The Durban conference reaffirmed carbon market mechanisms and the role of the CDM going forward as negotiations continue toward a new global climate agreement by 2015.

1. CDM for GHG Emission Reduction – Lessons
Learnt & Future Direction
Multicountry Observational Study Mission on Greenhouse Gas Emission Reduction
Taipei, Republic of China, 1-5 October 2012
Dhirendra Kumar
Team Lead, Project & Entity Assessment Unit, SDM Programme, UNFCCC Secretariat

2. Overview
1. Context
2. The UN carbon market mechanisms
3. Lessons Learnt
4. Durban and future prospects
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3. Background
FIRST MOVER
The United Nations has
overseen the
development and
operation of the world’s
first large-scale carbon
offset mechanism for
more than a decade.
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4. Background
THE EXPERIENCE OF THE CDM
MAKES CLEAR THAT THERE ARE NO EASY SOLUTIONS
There is no reason to
believe that any new offset
programmes will find the
going easier. Other offset
mechanisms would have to
overcome the same hurdles
that the United Nations has
had to overcome, unless of
course they learn from what
has gone before.
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5. Background
Framework Kyoto Protocol Marrakesh
Convention Accords
Agreed in 1997 (entry into
Agreed in 1992 force in 2005) Agreed in 2001
(entry into force
in 1994) All Convention signatories Operationalized
except Afghanistan, the market-
Near universal Canada, USA based
ratification mechanisms
Established three market-
based mechanisms
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6. The three mechanisms
Clean Development Mechanism (CDM)
Offsetting mechanism
Issues credits for emission reductions in
developing countries
Also promotes sustainable development
Other two mechanisms
Joint implementation and international
emissions trading
Have attracted significantly less investment
Allow developed countries to reallocate their
mitigation targets among each other
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7. CDM around the world
Over 5,600 projects in the pipeline
>4,600 registered projects in 75 countries
>2.7 billion CERs estimated in pipeline;
1 billion CERs issued
… with 1.7 billion more by 2020
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8. Registration and issuance
Preparation Validation of Consideration
of project project of request for
proposal proposal registration
By project By third-party By Executive
participants auditor Board
Consideration
Monitoring of Verification of
of request for
emissions emissions
issuance
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9. Basis for issuing credits
Cumulative
emissions
Baseline
Credits
issued
(ex post)
Actual emissions
Time
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10. Types of CDM projects
• Over 100 methodologies are currently in use
• Most project types are eligible, including CCS
• Exceptions:
a) Nuclear
b) Most land-use, land-use-change, and forestry
projects
• Geographically diffuse activities (e.g. household
lighting, cook stoves etc.) can be considered as a
single project  programme of activities /
programmatic CDM
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11. Distribution of credits to date
12%
5% HFC23
N2O
7%
45% Hydro
Wind
8%
EE
Other
23%
Project types have to date been dominated by industrial gas destruction.
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12. Distribution of all credits in pipeline
17%
HFC23
38% N2O
9% Hydro
Wind
EE
16% Other
7%
11%
Project types are expected to become more balanced over time.
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13. Examples of CDM projects (1)
Household biogas
digesters
CDM Project 121
Karnataka, India
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14. Examples of CDM projects (2)
Rapid and reliable
bus transport
CDM Project 672
Bogotá, Colombia
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15. Examples of CDM projects (3)
Solar cookers
CDM Project 2307
China
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16. Primary design principle
ENVIRONMENTAL INTEGRITY
PRIMARY DESIGN PRINCIPLE
Need to ensure that
offsets are high-quality
and additional.
The CDM itself is a carbon
‘standard’ because it sets
out its own standard
procedures for assuring
the quality of projects.
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17. Additionality
• Broad range of tools for the project-based approach
 Investment analysis
 Barrier analysis
 Common practice analysis
• Time-bound crediting periods, revisions to baselines
Cumulative
emissions
Time
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18. Additionality: beyond the project-based approach
• Strengths of the project-based approach:
 Individualized assessments
 Generation of rich and voluminous data
• Weaknesses of the project-based approach:
X Extremely resource-intensive
X Potential for inconsistency across projects
• Alternatives:
Performance benchmarks
Positive lists Conservative estimates
Standardized baselines Sector-based crediting?
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19. Secondary design principle (1)
ACCESSIBILITY
SECONDARY DESIGN PRINCIPLE (1)
• Streamlining of
operational processes
• Clarity of guidance
• Stakeholder engagement
and consultation
• Capacity-building for
potential offset providers
• Risk-based assessment
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20. Secondary design principle (2)
AN INTERCONNECTED CARBON MARKET
IS MORE EFFICIENT
• Avoid patchwork of
standards
• Common rules for
measurement,
reporting and
verification
• Opportunities for
trade, export, and
commercial ties
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21. Looking forward
SIGNS THAT THE GLOBAL CARBON MARKET
WILL CONTINUE TO GROW AND EVOLVE
• New domestic and regional
emissions trading systems are
emerging
• Several proposed emissions
trading systems will accept
CDM credits (CERs) for
compliance purposes
• Supply of CERs is expected
to meet demand
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22. Durban Conf. Decisions
Affirmation of market-based
mechanisms
• Parties acknowledged the role of market-
based mechanisms in helping to meet the
climate change challenge
Future of the CDM is guaranteed
• Agreement to adopt a second commitment
period (starting in 2013 and running until
2017 or 2020)
• Agreement to maintain and build upon the
existing market-based mechanisms
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23. Durban Conf. Decisions: New MBM (1)
New Market Based Mechanism
• New common market based mechanism under UNFCCC
• Important element in the EU package for agreeing CP2
• Procedures and modalities in 2012
• EU proposed in earlier submissions
a Sectoral Crediting Mechanism to:
• Move from projects towards mitigation
in sectors, regions/cities, economies
• Improve governance and efficiency
• Other parties may have different views
• Parties still to agree on the features of the mechanism
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24. Durban Conf. Decisions: New MBM (2)
Close climate Build on CDM
finance gap experience
• Align climate finance • CDM reform goes ahead
needs with private at pace
sector investment • Reduced transaction
requirements costs
• Leverage scarce public • Move beyond project
funds via private funds boundaries
A global market Scale up
• NMBM , NAMA´s emission
improved CDM could be reductions
the stepping stone for a
global carbon market • Sector transformation
instead of individual
projects
• Achieve systematic host
country involvement
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25. CDM Policy Dialogue
www.cdmpolicydialogue.org
• High level panel - distinguished persons not connected to CDM
• Independent from UNFCCC and CDM EB
• Recommend actions to best position CDM in the future
• Focus on 3 research areas: Impact, Governance, Context
• Report presented at EB69 (Sep) & ready for CMP 8
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26. Some “burning” questions
• What is the role of CDM and JI in the future?
• How can CDM remain relevant and competitive
in a fragmented market? (harmonizing agent)
• Are the new mechanisms and ETSs going to
strengthen or compete with CDM/JI?
• Will credited NAMAs be integrated in the carbon market?
• When are the new mechanisms going to be operationalized?
• How is the global carbon market going to look like in 2015/2020?
• Which KP units will be eligible under the new ETSs?
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27. However………Fit for the future
• Much has been invested in the CDM – in intellectual,
institutional and monetary terms.
• The CDM has demonstrated itself to be an effective
tool for incentivizing low carbon development.
• A central tenet of the Board’s work in its last year of the
first commitment period is to ensure that the CDM is “fit
for the future”.
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28. Conclusions
1. Carbon mechanisms - broad agreement in Doha to continue & expand
2. CDM - learning-by-doing instrument; on-going improvements (PD)
3. National/regional markets - means to engage private sector financing
4. UNFCCC - linking future international carbon mechanisms/markets
5. Intense negotiations - global agreement by 2015
6. Carbon market - critical period of maturation;
still can enable low-cost mitigation
7. “Interesting times” ahead! - domestic and
regional developments in 2012-2015
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29. “Credible offset mechanism for a low greenhouse gas future promoting
sustainable development’’
[Vision of CDM Business Plan 2012- 2013 ]
www.unfccc.int
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