Institute for Global Environmental Strategies Towards sustainable development - policy oriented, practical and strategic research on global environmental issues COP16 Decision on COP16 Decision on Market Mechanisms Market Mechanisms February 2011 Market Mechanism Group Market Mechanism Group Institute for Global Environmental Strategies
Summary of major outcomes Summary of major outcomes CDM CDM Appeal to CDM-EB Pending Loan scheme for CDM projects in countries with less than 10 Loan scheme for CDM projects in countries with less than 10 projects registered Decided to establish Standardized Baseline Decided to establish Simplified modalities for demonstrating additionality Decided to expand Eligibility of CCS as CDM Decided to be eligible JI JI Charging fees for JI projects Decided to introduce Future operation of JI in Post-2012 period Pending p p g Market mechanism under post-2012 regime Existing Kyoto mechanisms Pending Existing Kyoto mechanisms Pending Mechanisms under UNFCCC Decided to consider to establish 2 2
Adopted guidelines for a loan scheme Adopted guidelines for a loan scheme F Funding for the loan scheme from any interest accruing on di f th l h f i t t i the Trust Fund for CDM and voluntary contributions Covering the costs of the development of PDDs validation Covering the costs of the development of PDDs, validation and the first verification Shall be applied to a country with fewer than 10 registered Shall be applied to a country with fewer than 10 registered CDM projects as of 1 January of the year Required estimated emission reductions or removal of at least Required estimated emission reductions or removal of at least 7,500t-CO2 /yr on average for LDCs or SIDS 15,000t-CO2 /yr on average for countries other than LDCs or SIDSs No interest rate shall be charged Repaying the loan starting from the first issuance of CERs Implementing agency will be selected and make a contract with UNFCCC secretariat Loan may be written off, if the project is abandoned, fails to be registered under CDM process 3 3
Outline of the loan scheme Outline of the loan scheme Repayment/ Reporting Transfer CDM project CDM project p p j j funds participant participant Monitoring annually Implementing Implementing Implementing Implementing Developing p g UNFCCC UNFCCC UNFCCC UNFCCC UNFCCC UNFCCC UNFCCC UNFCCC agency agency agency agency PDD/Validation Secretariat Secretariat Secretariat Secretariat /Verification reporting reporting CDM CDM CDM CDM CDM CDM CDM CDM Advisor Advisor Advisor Advisor Disbursement Consultant/ Consultant/ Consultant/ Consultant/ Consultant/ Consultant/ Consultant/ Consultant/ DOE DOE DOE DOE Implementing agency may request the secretariat to withhold Implementing agency may request the secretariat to withhold CERs issued until the repayment is complete 4
Decided to develop “Standardized baseline” Decided to develop “Standardized baseline” Standardized baseline: A baseline established for a Party to facilitate the calculation of emission reduction and/or the determination of additionality for CDM d t i ti f dditi lit f CDM Parties, project participants, admitted observer organizations through the host country’s DNA may submit organizations through the host country s DNA, may submit their proposals for SB applicable to new or existing methodologies for consideration by CDM EB methodologies for consideration by CDM EB EB develops SB in consultation with relevant DNA prioritizing methodologies that are applicable to… p g g pp LDCs, SIDS, Parties with 10 or less registered CDM as of December 31 2010 Underrepresented project activity types or regions, particularly, for U d t d j t ti it t i ti l l f energy generation in isolate systems, transport and agriculture Development costs for CDM can be reduced Development costs for CDM can be reduced Objectivity and predictability of CDM process will be increased 5 5
Process to develop standardized BL Process to develop standardized BL Process to develop standardized BL Process to develop standardized BL Approval/Review Approval/Review CDM EB CDM EB CDM EB CDM EB CDM EB CDM EB CDM EB CDM EB Standardized Baseline Baseline scenario and calculation for its B li i d l l ti f it Cons emission are standardized Prop Prop Ex. Usage of incandescent lamp and its sultatio posal posal emissions i i Judgment for addtionality is standardized on E Ex. Diffusion rate of fluorescent lamp is less Diff i t f fl t l i l than 5% Party Party Party Party Industry Industry Industry Industry Project Project Project Project Organization/ Organization/ Organization/ Organization/ （ DNA （ （ DNA （ DNA ） DNA ） ） ） Participants Participants Participants Participants Admitted Observer Admitted Observer Admitted Observer Admitted Observer Admitted Observer Admitted Observer Admitted Observer Admitted Observer Proposal Proposal organization organization organization organization 6
Simplified modalities for demonstrating additionality Simplified modalities for demonstrating additionality Simplified modalities for demonstrating additionality for CDM projects will be expanded to Type III projects (emissions reduction by less than 20,000 t-CO2 /year) Simplified modalities for demonstrating additionality… EB 54 (May 2010): Established the simplified modalities for demonstrating additionality for CDM projects up to 5 MW of renewable energy and energy efficiency projects MW f bl d ffi i j t to save less than 20GWh /year... If such project activities are located in LDCs/SIDs or in a If such project activities are located in LDCs/SIDs or in a special underdeveloped zone of the host country identified by the Government before 28 May 2010, y y , demonstration of additionality is no longer required for the CDM projects Significant implication for development of CDM projects in LDCs 7 7
CCS is eligible as CDM CCS is eligible as CDM g Long controversial issue since CMP2 in 2006 Oil producing countries, Norway, Australia, Oil d i t i N A t li Japan agree, while OASIS, Brazil disagree SBSTA will elaborate modalities and procedures for CCS-CDM to address the procedures for CCS CDM to address the numerous issues, recommending a decision to CMP7 to CMP7 Issues indentified ： Site selection, stringent Issues indentified ： Site selection, stringent monitoring plan project boundaries project monitoring plan project boundaries project monitoring plan, project boundaries, project monitoring plan, project boundaries, project emissions, risk and safety assessment, long-term emissions, risk and safety assessment, long-term liability for potential leakage and seepage, potential liability for potential leakage and seepage, potential liability for potential leakage and seepage potential liability for potential leakage and seepage potential risk of CO2 release etc. risk of CO2 release etc. 8
Accreditation Accreditation Commends the EB for the revision and the adoption of the accreditation standard adoption of the accreditation standard Requests the EB to adopt and apply a procedure to address significant deficiencies in validation or t dd i ifi t d fi i i i lid ti verification report → related provisions in “Modalities and procedures for a CDM” may be reviewed and amended Requests the EB to continue to monitor the timelines for the validation/verification process and publish a compilation of information Requests the SBSTA to consider the issue of q materiality & recommend draft decision for CMP7 9
Introduction of charging fees for JI track 1 Introduction of charging fees for JI track 1 JI Track 1 ： JI project by Annex I countries who are in compliance with the Kyoto who are in compliance with the Kyoto mechanism eligibility requirements New fees: US$20,000 for large-scale project, US$5 000 for small-scale project US$5,000 for small scale project Level of the fees will be reviewed at CMP7 Currently, 80% of the budget for JISC depends on voluntarily contribution of Parties on voluntarily contribution of Parties These new charging fees can contribute to financial independence of JISC financial independence of JISC 10 10
Future operation of JI in Post Future operation of JI in Post-2012 utu e ope at o utu e ope at o o J o J ost ost 2012 0 What would be a future operation of JI project in p p j post-2012 period if there is a gap? 2008 2008 2012 2012 2015? 2015? st c.p nd c.p G Gap period G Gap period G Gap period G Gap period i d i d i d i d 1 st 2 nd c.p c.p? ? Reduction occurred during the gap period by JI project may not produce ERUs since AAUs are not allocated to Annex I countries ll d A I i Just take note the view of the need for a Just take note the view of the need for a future operation of JI after 1 st c.p 11 11
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