The CDM has shown how effective project-based mitigation mechanisms can be. After some initial problems with project registration, the capacities needed for efficient processing were built at all levels: at the UNFCCC Secretariat, in host country authorities and among project developers and auditors. The CDM reached peak performance in 2012, with more than 3,200 projects registered within the course of a single year. That peak also marked a turning point. As the European Union had not increased the contingent for eligible certificates generated by the flexible mechanisms for the trading period beginning in 2013 in its Emissions Trading Scheme (to date the most important source of demand for those certificates), the price for certificates effectively crashed. And for a long time, it was unclear as to whether and to what extent market-based mitigation activities would continue under the international climate regime. With the adoption of the Paris Agreement, the path is now clear for further use of international market mechanisms. Uncertainty still abounds, however, regarding the role the existing mechanisms will play – especially the CDM and the registered projects in its pipeline.
Against this backdrop, the BMU is funding the project “Analysis of Current Developments in the Global Carbon Market”, which is being carried out by a consortium headed by the NewClimate Institute. The main aim of the project is to analyse both the current situation and the potential for existing and new climate change mitigation activities, and to use the results to draw up recommendations for action. In conducting its analysis, the project team addresses three research questions:
How great is the risk that existing CDM projects will be unable to continue? Which market-based and non-market-based instruments could be used to secure their continuation and what impact would the respective supportive measures have on the climate? These questions have already been addressed in a recently published report.
What potential is there regarding supply of CERs up to 2020 based on existing projects? Does that potential differ in respect of high-risk versus low-risk projects? How might that potential fluctuate given differing demand scenarios? The project team recently published a report which addresses these questions.
What potential might there be for new marketable emission reduction activities in the period up to 2020 given sufficient market demand?
The research results will be used to provide input for the international climate negotiations on the development of market-based mechanisms and to highlight ways in which to deal with existing projects in the transitional phase until the new climate change regime is in place. The findings will also be used to make recommendations for the design of the new cooperative market-based mechanisms and to outline the implications concerning treatment of CDM projects beyond 2020.
Implementation: NewClimate Institute gGmbH
Other Organisations Involved: Öko-Insitut e.V.; Lambert Schneider (SEI Associate)
Contact: Thomas Day, firstname.lastname@example.org