Klima und Umwelt

CDM: current status and possibilities for reform

01.11.2005 | HWWI Research Paper | von Axel Michaelowa

The Clean Development Mechanism (CDM) has seen a spectacular rise of activity since mid-2005 that has led to more than 400 project submissions with a combined estimated emission reduction volume of 570 million t CO2 eq. until the end of the commitment period. Several technologies have been mobilised in a large scale that had not been predicted to play any significant role. However, many observers continue to criticize the CDM Executive Board’s handling of the project cycle and the lack of development benefits of CDM projects. Therefore, calls for CDM reform have gained strength. An analysis of the CDM project portfolio shows that Least Developed Countries and Africa have so far been sidelined. However, more small-scale projects have been submitted than expected from theoretical analyses  of project cycle transaction cost, maybe due to high CER price expectations and a high share of unilateral projects. While developing country companies have been able to capture almost half of the CDM consultancy market, they have not made an inroad into validation and verification. The concentration of host countries has increased. Development benefits of CDM projects are often limited, especially of the large projects destroying industrial gases. The rejection rate of proposed methodologies remains stubbornly high but consolidation of methodologies simplifies document submissions. The time lag from submission of project documentation to registration has recently been falling. Additionality testing is a key element that also supports the development target of the CDM. COP 11 should remove the cut-off date for early project CER generation and allow policy-based CDM as well as unlimited bundling of projects. It could streamline the additionality test by defining investment test and barriers more clearly and removing the common practice test. COP could also contemplate levying a higher adaptation fee from end-of pipe non-CO2 reduction projects. Annex B countries should stop funding CDM capacity building by development aid and support baseline methodology development for hitherto non-represented project types and host country baseline data collection. The EU and Canada would give an important signal that the CDM continues beyond 2012 by making a unilateral declaration that CERs will be valid in their emissions trading schemes after 2012.