Status and future of the cdm

Status and future of the CDM
& new opportunities for
carbon financing

Matthias Krey, Perspectives GmbH
16.11.2011

Training Course “Existing CDM Potential and Perspectives for
Carbon Finance in RCREEE Member States beyond 2012”,
Cairo, Egypt, 16. November 2011

www.perspectives.cc · info@perspectives.cc © 2011 Perspectives GmbH

Agenda

 Status of CDM in MENA...and future incentives?
 Climate Finance vs. Carbon Finance
 NAMAs
 Sectoral Crediting
 Donor funds
 Summary

www.perspectives.cc · info@perspectives.cc 2

Status of CDM in MENA...and what future incentives?


CDM projects in MENA

Yemen 0
1

UAE 5
12

Tunisia 2
5

Syria 3
4

Saudi Arabia 0
2

Qatar 1
2

Oman 0
2 Registered

6 Number
Morocco 17

Libya 0
1

Lebanon 0
1

Jordan 2
4

Iran 7
13

Egypt 10
17

0 2 4 6 8 10 12 14 16 18


CER price development Q3/08 until Q4/11


CER prices fall with EUA prices!


Main reasons for price decline

 EU Emissions Trading Scheme is projected to be long until shortly
before 2020
- Financial crisis => less industrial production => less emissions than
forecasted
- Around 800 million tons of EUAs could be carried over from 2nd period
(2009-2012) to 3rd period (2013-2020)
 Limited demand for CERs post-2012 from governments as no
succesor treaty for Kyoto Protocol in sight


Pledges


Climate Negotiations 2011 –
The clock is ticking…

• Background:
Kyoto Protocol ends 31. December 2012
So far no successor treaty agreed
Successor treaty in principal the basis for future global emission
reduction efforts
• Current assumptions: COP/MOP in Durban will not achieve a massive
breakthrough
• CDM is likely to continue under the UNFCCC, the detailed structure
needs still to be resolved

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Demand for CERs from national initiatives is limited
• EU ETS: to continue until 2050
• But from 2013 onwards only CER imports from
• Projects registered before end 2012
• Projects registered in Least Developed Countries (LDCs) after 2013

• South Korea
• Start ETS 2015
• National pledge: -30% THG Emission ggü BAU in 2020, CER import possible
• Electricity: -27%, Industry: -18%, Transport: -34%, Buildings: -27%

• Australia
• CO2 tax 23 AUT$/t für Top 500 Emitter, CER import possible
• Start mid 2012

• US
• Only Californian ETS relevant, no CER imports!
• Start 1. January 2013 (formally 2012)

Climate Finance vs. Carbon Finance


From carbon finance to climate finance

Carbon markets Non-carbon market
(established) (up-scaling)
 Market and carbon revenue  Governmental driven
driven  Uncertain flow and channel of
- ETS financing
- Offets - Bilateral
- Multilateral
Gov. AAU sales JPN/CAN/NZ
- UNFCCC
CDM/JI
 Different sources
- Taxes, auctioning, public and
Gov. procurement
programs Governments Private sector EU ETS private funds, ODA
= Supply Forwarding compliance

= Demand

Climate Finance

Climate finance incentives for low carbon development
Year Maturity of mechanism
high low

1997 Kyoto Track
(1997/COP3)

2001 CDM (2001/COP7)

Conventional
CDM

2005
CDM
LCA
Programme of Activities
(Bali Action Plan
(PoA) - (2007)
REDD + 2007/COP13)
2009 (2009/COP15)
Autonomous Supported
NAMAs NAMAs New Market
(2009/COP15) (2009/COP15) Mechanisms
(e.g. Sectoral Crediting)
> 2010 (Cancun Agreements)

1. Registered projects only (2,148); 2. Registered PoAs only (2); As 19th April 2010
Source: Perspectives Analysis; Point Carbon‟s Carbon Project Manager (April 2010)

NAMAs


Nationally Appropriate Mitigations Actions (NAMAs)

 Concept created in the Bali Action Plan (2007) at COP13 to denote
[voluntary] mitigation actions by developing countries after 2012

“Nationally appropriate mitigation actions’ by developing
country Parties in the context of sustainable development, supported
and enabled by technology, financing and capacity building, in a
measurable, reportable and verifiable manner.”

 Futher specified in Copenhagen Accord (2009) at COP15
- Supported by technology, financing and capacity building
- 30 billion $US total by 2012; 100 billion $US yearly until
2020
- Should be measurable, reportable and verifiable - MRV


Wide options for NAMAs to support domestic goals

 Financial incentives (e.g. feed-in-tariff, tax incentives, low interest
loans)
 Standards (e.g. building codes on energy efficiency, technology
standards)
 „White‟ or „green‟ certificates trading (Energy efficiency or
renewables targets with trading)
 Domestic emission offset programmes
 Domestic emission trading system


NAMAs are a key topic of UNFCCC negotiations

 NAMAs can basically be categorized as follows:
- Unilateral NAMAs: mitigation actions independently funded and
carried out by developing countries
- Supported NAMAs: climate protection measures in developing
countries, supported by technical assistance and/or direct
funding for climate protection from Annex I countries of the
Kyoto Protocol ("directly" supported NAMAs)
 NAMA by developing countries and support by develop countries to
be recorded in a NAMA registry (to be established)


Sectoral Crediting


Sectoral Crediting - concept

Basic functioning (as per EU proposal)1
 NAI defines sectoral target, to be reviewed & approved by COP
 Substantially below BAU, absolute target
 Covers all entities/installations within sectors
 NAI implements national policies zto achieve target
 Emission Reduction Certificates may be issued in respect of sectoral
emissions reductions beyond the absolute emission threshold
 ex-post crediting
 no-lose target
 Supervision by COP / „a body“
 Procedures and modalities tbd by COP (incl. MRV)
1 Submission of the EU to the 6th AWG-LCA

Sectoral Crediting – incentives for
mitigation

No lose target • No penalty in case the target is missed
in given crediting period
Emissions • Issuance of credits in case target is
of GHGs exceeded

BAU-emissions

No penalty

No-lose target
Credits issued
actual emissions

CP CP CP time


Donor funds


Donor funds: Financial, technology
and capacity-building support
 The financial, technology and capacity-building support agreed in Cancun
applies to both mitigation and adaptation actions by developing countries
 FAST-START FINANCE UP TO 2012
- fast-start finance for developing countries of USD 30 billion up to
2012
 NEW LONG-TERM FUNDING ARRANGEMENTS
- In order to scale up the provision of long-term financing for developing
countries, Governments decided to establish a Green Climate Fund
functioning under the guidance of, and be accountable to the
Conference of the Parties (COP).
- Industrialized countries committed to provide funds rising to USD
100 billion per year by 2020 to support concrete mitigation actions by
developing countries that are implemented in a transparent way.
- Funds would be raised from a mix of public and private sources


Funding sources for both adaptation
and mitigation projects
 Universe of funding sources
- Bilateral
- Multilateral
- Foundation / Philanthropic
- Private sector
 Bulk of available and emerging resources relates to mitigation, mainly through
transactions under the CDM in the carbon market and through World Bank
administered carbon funds and facilities
- including Climate Investment Fund (CIF) programmes like
- the Clean Technology Fund (CTF) and
- the Scaling Up Renewable Energy Program in Low Income Countries
- The Global Environment Facility (GEF) has been the largest source of
grant financing for energy efficiency and renewable energy projects.
Source: http://www.climatefinanceoptions.org/cfo/Funding%20Sources

New and additional funds?

“New and additional” mentioned in all major climate agreements
- UNFCCC
- Kyoto Protocol
- Copenhagen Accord
Never clearly defined
- “New and additional” to what? ODA vs. climate finance, past vs. present?
- “New and additional” above which baseline

Situation without baseline
- “New and additional” can not be assessed
- (Fast-start) finance fails to build trust

Only old wine in new bottles?


Summary


Summary

 The future of demand for CERs post-2012 highly uncertain
 MENA CDM projects which a high possibility for registration
before end 2012 might have problems finding a CER buyer
 High likelihood that prices for projects registered post-2012
will be very low (like voluntary market)
 First movers on developing country and donor side are
currently exploring NAMAs
 „old“ climate financing is available and planned to be scaled-
up (WB, GEF, etc)
 Pilot initiatives on New Mechs and NAMAs with a donor
country partner provide opportunity in the long-term (so far no
large sums of funds available)


Many Thanks for
Your Attention!

Matthias Krey, Perspectives GmbH
16.11.2011

Training Course “Existing CDM Potential and
Perspectives for Carbon Finance in RCREEE
Member States beyond 2012”,
Cairo, Egypt, 16. November 2011

www.perspectives.cc · info@perspectives.cc © 2011 Perspectives GmbH

Status and future of the cdm

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