Miniseminar on The Clean Development Mechanism 22 May 2007, State secretary Heidi Sørensen, Ministry of the Environment

Talking points 
check against delivery
(the session was web casted)

This seminar was organised to improve our understanding of the CDM, and to get advice on how we should act both when we participate in the market as a buyer and when we contribute to developing rules and practices.
 
CDM was crucial for arriving at a solution in Kyoto, even though the mechanism was heavily debated at the time. The Kyoto Protocol specifies two equal purposes for the CDM:

• Firstly, the CDM shall assist non-Annex I countries in achieving sustainable development.
• Secondly, the CDM shall assist Annex I countries in achieving compliance with their commitments

The developments since Marrakesh in 2001 can also be seen as a success story. Many are surprised of how much the CDM has achieved in a relatively short time. Today’s presentations have also shown some of the criticism raised against the mechanism and the challenges that have to be faced.

The CDM is clearly an increasingly important vehicle for enhanced cooperation between developed and developing countries. It involves both public and private sector. More than 1000 projects are registered and another 2000 are in the pipeline.

The UN estimates that these more than 3000 projects could generate 2.7 billion CERs to 2012. Each CER is worth 17 euros at the exchanges. The value of 2.7 billion tonnes is over 45 bn Euro (over 350 bn Norwegian kroner). A considerable part of this sum will reach developing countries.

There seems to be consensus in the climate negotiations that the CDM will continue after 2012, at least for less developed countries. Even if more developed non-Annex I countries accept some forms of quantitative commitments, these countries may still be project hosts under CDM or a similar mechanism for many years.

The EU and Norway’s objective of avoiding 2 % increase in temperature can not be reached with the present structure of the Kyoto Protocol and the CDM. Even if the developing countries offset all their emissions through the CDM the reductions would not by far be sufficient. But for quite some time to come the CDM can play an important, and perhaps even bigger, role than today.

Under the Protocol the discussion on CDM follows two lines;

• how to improve the ”regional distribution of projects”, which can be read: how to get more projects in Africa
• how to improve the CDM system

The international climate regime, and a mechanism like CDM, will only keep its international credibility if there is wide participation among countries. The lack of projects in Africa is a serious challenge for the whole process. We must find solutions that meet the needs of the Africans, but these solutions must not compromise the environmental credibility of the CDM. Fortunately the supply of projects appears better in the field than the UN’s statistics, but there are considerable challenges in building institutions and carrying the project ideas through.

Up to the Marrakesh conference in 2001 it was not possible to agree on criteria for sustainable development to be used for all projects. The responsibility to assess the project’s contribution to sustainable development was left to the host countries. Many countries make an effort in this respect. There are requirements in the Marrakesh Accords for inviting comments from stakeholders to the projects. This opportunity could and should be more used by stakeholders.

Deciding additionality – a main focus for the presentations held today - will always be based on judgment. It is often difficult to tell whether a project would have happened in the absence of CDM, especially retroactively (if it is already in operation). Maybe there are better ways to deal with this than today’s case by case basis in the Executive Board. Clearer cases are cracking of N2O or HFCs, or CCS projects, but such projects have raised concerns about sustainable development. It seems that the Executive Board has become more critical regarding additionality and is on the right track. This is a good development.

Norway has emphasised developing a good set of rules and functional institutions under the CDM. We have worked to make the UN system really responsible for the evalution of the projects, and able to deliver projects that generally do good and don’t do harm. The set of rules is rather large – and costly to apply. There are limits to how thorough the control regime can be without killing the whole mechanism. A balance must be sought. It is important to let the CDM organisation prove itself for a while to see whether it does deliver results according to the intentions.

The EB has a huge responsibility. It is effectively ”printing money”. Each CER issued can be cashed out at the climate exchange at 17 euros. Everybody could agree that the CDM has faced problems – or ”challenges” - in its infancy. That would be normal from any major (economic) mechanism.

Governance of the CDM has also been criticised. The composition of the Executive Board is UN style, with representation from the various regions and groups. The strength of this composition is that it builds confidence - all groups should feel represented. A weakness may be that some members may not have a relevant background, or may not be given sufficient time and resources for the task. However, similar observations could probably be made regarding many boards in both public and private sector. 

International cooperation is good. If the CDM really becomes an important vehicle for development and international cooperation, it is important beyond the climate issue. But it must prove that it delivers, both to the environment and to the society.

We will make use of what we have learnt and will learn today, both when we act as buyers, work to improve the Kyoto mechanisms, and establish a post 2012 regime.