Negotiators learn lessons for new markets as Kyoto mechanism talks end in Paris

Published 21:17 on December 4, 2015  /  Last updated at 09:37 on December 5, 2015  /  Aviation/CORSIA, Climate Talks, EMEA, EU ETS, International, Kyoto Mechanisms, New Market Mechanisms  /  No Comments

Decisions affecting the future of the CDM and JI, the Kyoto Protocol’s carbon market mechanisms, have once again been postponed by negotiators at this year’s annual UN climate summit, but some identified progress that could benefit a new global climate pact.

Decisions affecting the future of the CDM and JI, the Kyoto Protocol’s carbon market mechanisms, have once again been postponed by negotiators at this year’s annual UN climate summit, but some identified progress that could benefit a new global climate pact.

A review of the CDM’s modalities and procedures, which is to pave the way to an overhaul of the beleaguered scheme, was deferred until next May by negotiators under the SBI track at the talks, after they were allotted just two hours to discuss the matter this week.

“Every time, this review is taken hostage … It’s a shame because it’s totally relevant to ADP [negotiations on a new global climate pact],” said Jeff Swartz of emissions trading lobby group IETA.

“How can countries build off of Kyoto’s flexible mechanisms when they don’t even give enough time here for delegates to attempt to fix them.”

The CDM review was originally scheduled to take place in 2013 and draw from the experience of the scheme’s executive board, input from investors and stakeholders, and recommendations made in 2012 by a ‘Policy Dialogue’ panel of experts, but it has been swept up in political wrangling at nearly every round of negotiations since.

This has led to the CDM-EB to attempt to unilaterally improve the scheme through incremental measures and rule changes.

The CDM has channelled over $300 billion in investment to carbon-cutting projects in the developing world, but funding has dried up as nations failed to adopt new emission reduction targets, causing demand to collapse.

That led to CER prices crashing from over €20 in 2008 to less than €1, which in turn triggered the CDM-EB to hunt for new buyers, including companies and individuals looking to voluntarily offset their carbon footprint, as well as the aviation sector, which is currently designing its own market-based mechanism under ICAO.

The CDM’s board last week approved a new methodology, co-developed with the UN’s aviation body, which allows carbon credits to be earned through installing an electric motor in an aircraft’s landing gear, reducing emissions from taxiing.

JOINT IMPLEMENTATION

Meanwhile, talks to reform Kyoto’s JI mechanism – for projects hosted in developed countries- advanced slightly in Paris this week on a text aimed at making sweeping changes to the scheme, including improving its environmental integrity and merging its two tracks.

Several negotiators said parties managed to agree on most aspects of the text, leaving just a few brackets relating mainly to issues of eligibility of participants and transition – or what to do with existing projects.

“Checking that existing projects are still additional if they are to continue is still a contentious issue,” one negotiator told Carbon Pulse, adding that the EU was pushing strongly for these added checks.

But decisions on these remaining issues, as well as an agreement over the entire JI text, have also been kicked to the spring meetings.

Project activities and credit issuances under JI have ground to a halt, but some countries, as well as the JI’s Supervisory Committee, continue to hunt for a future role for the mechanism.

JI AS A MODEL

Many of the countries that support the inclusion of market-based mechanisms in a Paris agreement are framing JI, as well as the CDM, as ready-made solutions that should be considered at least as models once improvements are made to them.

“This is about trying to make JI into a new baseline-and-crediting mechanism that countries can on-board into and use in their INDCs,” IETA’s Swartz said.

“In theory it could be a mechanism that countries could use, but parties haven’t even touched on that yet in ADP.”

But several negotiators said that reviewing and reforming both Kyoto schemes was a crucial prelude to designing new market mechanisms under a global agreement.

“Whatever new mechanisms are coming, there is a general understanding that the 13-odd years of experience with the existing mechanisms needs to be utilised … and reviewing both mechanisms captures those lessons,” one told Carbon Pulse, declining to be identified because they were not authorised to speak to the press.

“It’s been a constructive, intellectual exercise rather than a high-level political one like those going on in other rooms. It’s not about whether there are going to be new projects, nor does it mean we’re going to move these mechanisms into [a Paris agreement].  Rather we’re going to look at what we’ve learned from and apply those lessons.”

“JI is one extreme, and the CDM is the other extreme, and we’re going to have a world that is somewhere in between … But [reviewing JI is important] because it operates in a context that is actually, in some ways, more relevant for the future than the CDM, because it introduces [emissions] caps.”

The new post-2020 Paris deal is intended to bind all emitters, making JI the more relevant instrument rather than the CDM because it applies to developed nations with binding Kyoto emission goals rather than developing nations without them.

CLEAR LESSONS

JI has earned the more ignoble reputation compared to its sister mechanism, after a study by SEI earlier this year found that almost 75% of the ERUs issued – most of those unilaterally approved by Ukraine and Russia – may not have represented actual emission reductions and potentially increased global emissions by some 600 million tonnes.

The JISC has also since 2011 recommended unifying the mechanism’s two tracks to prevent the re-emergence of heavily-criticized Track 1 projects that lack international oversight.

“We have clear lessons from the two tracks, and the decision to merge the tracks is in response to these lessons,” one of the negotiators said.

They added that another valuable lesson has been to determine the factors that have led to those Track 1 projects that have been identified as having “extremely” high environmental integrity.

“The basic thinking is to include the approaches that led to those results into the JI’s new modalities, namely strict additionality checks, national policies that are reflected in the baselines, and strong institutional oversight with credible verification, transparency, and public involvement at both validation and certification.”

“It comes down to what things need to be overseen internationally for [the mechanism] to be credible, and what things can be implemented by the host country because they do it best.”

By Mike Szabo – mike@carbon-pulse.com

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