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Clean Development Mechanism |
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The Clean Development Mechanism (CDM), defined in Article 12 of the Kyoto Protocol, allows a country with an emission-reduction or emission-limitation commitment under the Protocol to implement an emission-reduction project in developing countries. Such projects can earn saleable certified emission reduction (CER) credits, each equivalent to one tonne of CO2, which can be counted towards meeting Kyoto targets.
The mechanism is seen by many as a trailblazer. It is the first global, environmental investment and credit scheme of its kind, providing a standardized emissions offset instrument, CERs. A CDM project activity might involve, for example, a rural electrification project using solar panels or the installation of more energy-efficient boilers.
The mechanism stimulates sustainable development and emission reductions, while giving industrialized countries some flexibility in how they meet their emission reduction or limitation targets.
The CDM as it relates to industrialized countries and their their nation's companies are able to earn "Emission Reduction Credits", while developing countries acquire technology and capital and earn Emission Reduction Credits that can either be banked or sold. Additionally the CDM grants Emission Reduction Credits for investments in new, emissions-reduction projects that are located in developing countries.
The CDM is a Kyoto Protocol "flexibility mechanism" which oversees emissions reductions in projects that are located in developing nations. These countries are not subject to the binding greenhouse gas emissions caps under the Protocol. Under the CDM, investors from Annex I countries receive CER units for the actual amount of greenhouse gas emissions reduction achieved, subject to host country agreement and the CDM Adaption Charge.
A key component of the CDM is the requirement of additionality. CER units generated under the CDM will only be recognised when the reductions of greenhouse gas emissions are additional to any that would occur in the absence of the certified project activity.
If necessary, the CDM presumes administrative assistance in locating project financing, if necessary. The administrative costs of the mechanism and the final structure of certification and verification under CDM are still under discussion. |
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| Objective | | | The major purpose of CDM was to help annex B countries comply with their emission reduction commitments. Apart from this CDM must also assist developing countries in achieving sustainable development at the same time contributing to stabilization of greenhouse gas concentrations in the atmosphere. | | | Operating Rules | | A CDM project must provide emission reductions that are additional to what would otherwise have occurred. The projects must qualify through a rigorous and public registration and issuance process. Approval is given by the Designated National Authorities. Public funding for CDM project activities must not result in the diversion of official development assistance.
The mechanism is overseen by the CDM Executive Board, answerable ultimately to the countries that have ratified the Kyoto Protocol.
Operational since the beginning of 2006, the mechanism has already registered more than 1,000 projects and is anticipated to produce CERs amounting to more than 2.7 billion tonnes of CO2 equivalent in the first commitment period of the Kyoto Protocol, 2008–2012.
CDM projects need to seek approval by the CDM’s Executive Board. A number of rules and conditions will apply, some to all project types and others specifically to afforestation and reforestation projects. While several of the detailed procedures to be applied to CDM forestry projects are still to be agreed, the overall framework is already established for approving projects and accounting for the carbon credits generated: Only areas that were not forest on 31st December 1989 are likely to meet the CDM definitions of afforestation or reforestation.
Projects must result in real, measurable and long-term emission reductions, as certified by a third party agency ('operational entities' in the language of the convention). The carbon stocks generated by the project need to be secure over the long term (a point referred to as 'permanence'), and any future emissions that might arise from these stocks need to be accounted for.
Emission reductions or sequestration must be additional to any that would occur without the project. They must result in a net storage of carbon and therefore a net removal of carbon dioxide from the atmosphere. This is called 'additionality' and is assessed by comparing the carbon stocks and flows of the project activities with those that would have occurred without the project (its 'baseline'). For example, the project may be proposing to afforest farmland with native tree species, increasing its stocks of carbon. By comparing the carbon stored in the 'project' plantations (high carbon) with the carbon that would have been stored in the 'baseline' abandoned farmland (low carbon) it is possible to calculate the net carbon benefit. There are still a number of technical discussions regarding the interpretation of the 'additionality' requirement for specific contexts.
CDM projects must be in line with sustainable development objectives, as defined by the government that is hosting them. Projects must contribute to biodiversity conservation and sustainable use of natural resources.
Only projects beginning in the year 2000 forward are eligible.
Two percent of the carbon credits awarded to a CDM project will be allocated to a fund to help cover the costs of adaptation in countries severely affected by climate change (the 'adaptation levy'). This adaptation fund may provide support for land use activities that are not presently eligible under the CDM, for example conservation of existing forest resources.
Some of the proceeds from carbon credit sales from all CDM projects will be used to cover administrative expenses of the CDM (a proportion still to be decided).
Projects need to select a crediting period for activities, either a maximum of seven years that can be renewed at most two times, or a maximum of ten years with no renewal option.
The funding for CDM projects must not come from a diversion of official development assistance (ODA) funds.
Each CDM project's management plan must address and account for potential leakage. Leakage is the unplanned, indirect emission of carbon dioxide, resulting from the project activities. For example, if the project involves the establishment of plantations on agricultural land, then leakage could occur if people who were farming on this land migrated to clear forest elsewhere. | |
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