The future of activities initiated under the Kyoto Protocol’s clean development mechanism remains an open question, leaving project developers in limbo and creating disincentives to investment. Several countries have called for a transition of these CDM activities to the new crediting mechanism set up by Article 6.4 of the Paris Agreement. A host of national and private sector institutions could also be drawn upon by the new mechanism. A new initiative led by Climate Focus and Koru Climate will analyze options on how to take elements of the CDM forward and provide a platform for interested governments and stakeholders to discuss and refine them. It was launched at the German Pavilion during COP22 in Marrakesh.
The existing pipeline of CDM activities can be considered both a liability and an opportunity for the Paris Agreement. A liability because finding a perspective for UN-approved CDM activities with crediting periods beyond the Kyoto Protocol is central to ensuring the credibility of the new central mechanism created under Article 6.4. It is however also an opportunity, because the existing pipeline of CDM activities may be ideally placed for scaling up mitigation action quickly and effectively under the Article 6.4 mechanism, and potentially also under the new, international cooperative approaches referred to in Article 6.2. “There could still be a lot of potential for using the CDM to drive emission reductions,” said Peer Stiansen, market negotiator from Norway during the launch.
Without an active transitioning of assets built up in the CDM – including registered CDM activities, at least some institutional aspects of the mechanism, the ongoing stream of post-2020 CERs, and potentially also some pre-2020 CERs – the default situation is that these are not recognized under the Paris Agreement. Since there is no direct legal link between the Paris Agreement and the Kyoto Protocol, the pipeline of activities created by the Kyoto Protocol have no status under the new regime and neither do the institutions that support them (i.e. DNAs, DOEs, registry infrastructure etc.). Mandy Rambharos of South Africa said that, while African nations had not benefitted from hosting many CDM projects, “it is very important to keep the momentum going,” since a lot of the reforms made to the mechanism in recent years could favour investment on the continent.
The transition topic in the negotiations
Several countries and observer organizations have put this issue on the agenda through their submissions and interventions on Article 6.4 by calling for a transition of CDM assets to the new mechanism (e.g. the African Group of Negotiators, Brazil, Norway, Pakistan, Tunisia and the Project Developers Forum). Similarly, at its most recent meeting, the CDM Executive Board suggested that the CMA consider the future role of the CDM, or its elements, in the context of the Paris Agreement.
While the fate of registered CDM activities has been raised by project developers and government negotiators alike, solutions are still absent on both political and technical levels. Until now, a thorough technical analysis that could support negotiators in understanding possible options has been missing. The transition of CDM assets is not a straightforward matter given that it must not pre-empt the rules on Article 6, which are yet to be negotiated, and yet must also fit the new context of the Paris Agreement, meaning that the transition of CDM activities must not lower the efforts of countries towards meeting their NDCs.
Contribution of the Transition Initiative
The initiative will build up the body of technical analysis available to support the political process and will be based on extensive consultations. A comprehensive options report will identify and analyse available options for the transition of different CDM assets. The options report will be informed by an assessment of the types, volumes and geography of CDM activities still operational and/or in need of funding, and will take into account legal feasibility and the political context of the transition.