Possible Development of CDM in the Post2012 Regime

1
Possible Development of CDM in the Post-2012
Regime

• DUAN Maosheng
• Tsinghua University
• Beijing, Nov. 19, 2007

2
Outlines

• Why CDM/flexible mechanisms
• Proposals on future development of CDM
• Main considerations under these proposals
• Possible way forward

3
Why CDM/flexible mechanisms

• To achieve emission reduction targets at lower
  economic cost
• Environmental effects and integrity, not economic
  or any other concern, should always be the first
  consideration
• Flexible mechanisms, in whatever forms, should
  always follow this principle
• Flexible mechanisms may be used only when
  necessary and really help to solve the problem
• Principles established by the convention should
  not be compromised

4
Proposals on future development of CDM

• Sectoral crediting mechanism (sectoral CDM)
• Benchmark crediting projects with emissions
  below the benchmark without further additionality
  test
• No-lose target no penalty in case of higher
  emissions and trade in case of lower emissions
• Cap-and-trade
• Policy CDM crediting emission reduction policy
  and measures
• Technology CDM crediting selected technologies
  without additionality test technology transfer
  and CERs transfer

5
Sectoral CDM

• Benchmark
• Similar to current CDM rules, while no
  additionality test
• Crediting activities and no linkage with cap for
  the whole sector
• Setting of the benchmark is crucial while
  difficult
• Suitable for sectors with homogeneous products
• No-lose target
• Arbitrary targets and not necessarily reflection
  of efforts
• Difficulties in aspects of data collection,
  quantification of individual efforts and
  incentives, etc.
• Cap-and-trade
• A type of targets and no linkage with CDM

6
Policy CDM and Technology CDM

• Policy CDM
• Additionality test of policies and measures
• Quantification of emission reduction
  considerations
• Consistence with the process of policy and
  measure formulation
• Technology CDM
• Promotion of technology transfer and emission
  reduction efforts
• Risk reductions for both sides of CER
  transactions
• Additionality assurance through identification of
  real qualified technologies and setting of
  baselines
• Promotion of additional emission reduction
  efforts through underlying certainty

7
Main considerations under these proposals

• Transaction cost
• Distribution issue
• Mobilization of investment for emission reduction
  efforts
• Catalyzing technologies
• Competence concern
• Further reduction of compliance cost
• Broader and deep involvement

8
Possible way forward

• Sectoral approaches could be a useful attempt for
  broader involvement when very carefully designed
• Sectoral approaches themselves do not necessarily
  assure the participation of developing countries
  as some major concerns of developing countries
  are not addressed automatically
• Pledge and review may further limit the
  participation possibility of developing countries
• Technical difficulty, such as data availability,
  verification possibility and related capacity,
  could be further major barriers

9
Possible way forward

• Major emitting sectors should be chosen
• Sectors with homogeneous products should be the
  first choice
• Public and timely availability and verification
  possibility of data as well as cost should be
  considered
• Electric power sector, iron and steel sector,
  cement sector, etc. could be possible choices
• Different approaches maybe suitable for different
  sectors

10
Possible way forward

• Developing countries have been making mitigation
  efforts very actively through CDM
• Underlying economic incentives could be an
  impetus for small developing countries, but not
  for large countries
• No political risks as well as additional
  financial and technical assistance could be an
  option for enhancing developing countrys
  mitigation efforts
• The demonstration of leadership and feasibility
  by developed countries should be helpful for
  developing countries further involvement

11
Thanksduanmsh_at_mail.tsinghua.edu.cn 86 10 6277
2596