Markets & Mechanisms

Developments inside and outside

the UNFCCC negotiations.

Building and Urban Methodologies Workshop

UNFCCC, Bonn, 27-28 March 2014

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What is CDM?

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What is CDM?

Cumulative CDM supply to 2020 from existing projects

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Challenging times

• Due to domestic politics and lacking ambition, supply exceeds demand by at least an estimated 870 million CERs (+530 million ERUs from JI)

• CER prices dropped 95% in past few years. Current price ~0.20 Euros/CER.

• Functioning price should be at least 5 Euro, estimated real abatement costs around 30 Euros/CO2 eqv

• The mechanism works - the markets do not (currently)!

• Pre-2020 gap could be closed by 20-40% by CERs from registered projects. Parties encouraged by ADP decision to use CERs to close the gap.

Markets are very likely to be a key component of any future climate-action framework because they:

• Contribute to sustainable development, tech transfer and other development objectives of the host countries

• Minimize the cost of climate action

• Empower the private sector by creating economic reasons to reduce emissions through the creation of tradable assets (units)

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THE POST-2012 GLOBAL CARBON MARKET

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In the meantime outside UNFCCC…

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• 2 degree C target 50-85% emission reduction by 2030

• Business as usual Average 6ºC temp increase

• Progress? Kyoto (15%) Cancun (85% voluntary) Durban (100% universal) Paris (Deal!)

• Durban Platform (2011): Agreement Adopt by 2015. Implement by 2020. “…with legal force for all parties…”

UNFCCC negotiations overview

• Revision of CDM M&P

• Revision of JI guidelines

• International emissions trading

• KP ambition

• Eligibility

• Second commitment period

UNFCCC negotiations overview

UNFCCC Negotiations

Kyoto Protocol / CMP

SBSTA ADP

SBI

Convention / COP

• Science• Mitigation• Financing • Technology transfer• Capacity building• Adaptation• NAMA• Reporting• Nairobi work programme• LULUCF• New mechanisms

2015 agreement

Agreement Design

Pre-2020 ambition

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Market mechanisms discussions

2015 2020

COP21

JI

CDM

FVANMM

ADP

Key issues include:

• Links to overall 2015 deal

• Is there a need for NMM or can CDM do the job?

• How to balance flexibility with environmental integrity of mechanisms?

• How to avoid double counting?

• Level of control: In UNFCCC or at national levels?

• Sustainable development…?

• To like or not to like markets?

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Some politics

Carbon markets very likely to stay

International carbon markets very likely to be connected under UNFCCC

One or several mechanisms beyond 2020.

Look for hooks for mechanisms, NOT for an operational manual for mechanisms in the 2015 agreement

Do not discard CDM quite yet Ambition, ambition, ambition!!!

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Conclusion

Thank you