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The future of the CDM

With Joint Implementation (JI) and the Clean Development Mechanism (CDM), the Kyoto Protocol launched the first internationally recognised crediting mechanisms. The CDM especially enabled valuable experience to be won and capacities to be built. At UN level, processes, procedures and methodologies were introduced, and institutions were set up to enable effective monitoring of the quality of climate change mitigation measures. At the same time, Parties introduced national-level processes to enable them to use the CDM. The private sector also developed considerable expertise: auditing agencies around the world have gained vast experience in validating climate change mitigation measures and have built up capacities at local level. In addition, a range of consulting businesses and project developers have specialised in identifying climate change mitigation potential and have developed suitable methods for use in leveraging that potential. It was under the CDM that a vast number of climate change activities with considerable climate change mitigation potential were introduced.

With the transition from the Kyoto Protocol to the Paris Agreement, the question arises as to how the legacies of the CDM should be dealt with – especially in relation to the successor mechanism in Article 6.4. The transition of certificates, CDM activities, standards and methodologies is one of the main sticking points in the climate change negotiations. Those in favour of full CDM transition argue that it would secure climate action investment and its mitigation effect. This could send a positive signal to the private sector and foster the level of trust needed to ensure the success of a future carbon market with private sector involvement. The transition of CDM activities could also promote timely use of the new mechanism, while continued use of CDM methodologies could lower transaction costs for investors who are already familiar with CDM requirements and procedures.

Those against full CDM transition say that recognising CDM certificates under the Paris Agreement would lead to a supply of certificates far in excess of expected demand. That excess would in turn result in a drop in prices and weaken the incentive for new mitigation effort. When it comes to transitioning CDM activities, they point to the fact that numerous programmes and projects demonstrate poor environmental integrity and should not, therefore, be transitioned for use with the mechanism in Article 6.4.

These differing standpoints make CDM transition in the period post-2020 one of the main sticking points in the climate change negotiations. However, initial approaches and solutions are starting to emerge which could serve to bridge those differences. For example, CDM certificates could be recognised for a limited period and this could apply only for certificates generated in a given period of time. To avoid lesser-quality CDM activities undermining the environmental integrity of the Paris Agreement, special assessment processes could be introduced. In addition, having been both assessed for their usability under the Paris Agreement and revised where appropriate, the methodologies and approaches used under the CDM could find their way into Article 6.4.

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