CDM-EB: Red tape cut further for projects but analysts warn on integrity risks

Published 17:37 on October 22, 2015  /  Last updated at 17:50 on October 23, 2015  /  Climate Talks, International, Kyoto Mechanisms, New Market Mechanisms  /  No Comments

The CDM’s executive last week agreed to develop a handful of measures to further simplify and streamline the mechanism’s often complicated and cumbersome procedures, but analysts warned that some of rule changes could threaten the already-battered scheme's environmental integrity.

(Corrects the number of CERs that have been cancelled on the UN’s new online platform to 1,712 from 1.7 million. Also clarifies that the CDM-EB did not support allowing the coordinating or managing entity of a PoA to include component project activities under the programme without DOE involvement)

The CDM’s executive last week agreed to develop a handful of measures to further simplify and streamline the mechanism’s often complicated and cumbersome procedures, but analysts warned that some of rule changes could threaten the already-battered scheme’s environmental integrity.

Following a sharp drop in CER prices over the past five years due to evaporating demand, the CDM’s executive is trying to reshape and refocus the scheme to help it become part of countries’ future emissions cutting plans as they meet in Paris later this year to agree a new global climate pact.

Among the new rules that the CDM-EB has asked the UNFCCC to draft were measures to:

– Simplify the steps and shorten the timeline for approving new methodologies
– Make it possible for project auditors (called Designated Operational Entities or DOEs) to conclude validation of a project and submit a registration request in the absence of a Letter of Approval from the project’s host government
– Allow a project to change its methodology after registration
– Increase the flexibility in changes to the start date of a project’s crediting period
– Allow project participants to change the DOE at the verification stage (This is currently allowed at the validation stage)
– Allow unlimited flexibility for verification schedules at Programmes of Activities (PoAs)
– Expand the application of materiality to PoAs. (Materiality defines which errors in a project’s reported data can be ignored because they are too insignificant when calculating the number of CERs it should receive)

“The proposed decisions seem relevant to streamline the CDM implementation process,” said analysts at Thomson Reuters Point Carbon, citing the current lengthy waiting times for receiving a Letter of Approval or getting a new methodology approved as some of the sources of administrative delays for new projects.

However, they warned that while increasing flexibility for a PoA’s verification could clear administrative backlogs and cut costs, it would require more scrutiny to prevent double counting.

RULE REWORKING

The Board also considered a number of other proposed measures, but requested the UNFCCC to rework them. They included:

– Allowing the pre-approval use of proposed or revised methodology
– Further shortening the current registration process
– Expanding the concept of materiality to a project’s validation
– Simplifying the registration process for project types that are automatically deemed as additional.
– Introducing delayed on-site inspections of DOEs and clarifying conditions for exemption for on-site inspections

“The new rules supported by the board seem rather beneficial for the CDM projects, although all the changes mentioned above are unable to resolve the key obstacle mentioned by the project owners in the (recent) CDM survey.”

SURVEY

The board also last week heard the results of a UNFCCC survey held carried over the summer, which was conducted to gauge the lay of the land for CDM participants in the scheme.

Among its findings, the UNFCCC reported that fewer than two-thirds of respondents reported that their projects were running under the CDM, while low CER prices and procedural costs were named as the largest operational barriers.

Click here to read Carbon Pulse’s summary of the survey’s findings

The CDM-EB also prepared its summary report for this December’s UN climate summit, testifying about the further declines in CDM activity and CER prices.

“The longer this decline in activity persists, the more capacity will be lost together with the significant opportunity the CDM holds for Parties to incentivize action on climate change and development,” it warned the negotiators that will meet in Paris.

However, the board also voiced hope for the future of the mechanism via the voluntary use of CERs and interest in the CDM raised by some countries through their INDCs.

“The continuation on the CDM is still on the agenda of the international talks, but at the same time there is no certainty that even if adopted the mechanism would receive considerable support at the international level after 2020,” Point Carbon said.

Based on the INDCs submitted by the roughly 150 countries so far, few reflect demand for carbon credits under an international market mechanism.

The CDM-EB added that of the 5 million CERs voluntarily cancelled to date, some 1,712 have been as a result of the UN’s new online offsetting platform that it launched last month.

By Mike Szabo – mike@carbon-pulse.com

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