Mechanisms: Rough Guide

November 20, 2000

What Southern delegates and NGOs should watch out for in CDM negotiations

1) The latest version of the CDM text (November 18) has a bracketed positive list of safe and environmentally sound projects eligible under CDM, listing options for renewable energy, energy efficiency, and demand-side management. Developing countries should push for renewable technologies, to safeguard against having to phase out CDM fossil fuel investments when they have to take on commitments in the future.

The text also has bracketed references to include sustainable LULUCF projects in this list. Inclusion of LULUCF (or sinks) in CDM will become a major issue this week. Better sense and science suggests its exclusion, but the US desperately wants sinks to be included. What cheaper way of meeting Kyoto commitments than planting a forest in a developing country, where both land and labour is cheap? The fact that huge uncertainties go with the use of sinks as a reliable and permanent form of carbon mitigation does not deter them. Another proposal by Colombia calls for temporary CERs - plant a forest, get temporary credits, chop it, get credits again. This is as stupid as it sounds, but if the US wants it, it is bully enough to get it.

It is also to be decided whether nuclear energy should be included in CDM. The buzz is that the US and EU are all set for a last minute deal, where the EU will allow sinks projects in this budget period only, if the US will give up the inclusion of nuclear energy. This suits the US - sinks projects will get cheaper CERs than nuclear projects.

2) What percentage will go towards the adaptation fund? Some industrialised countries are suggesting a meagre one per cent (part of which will go towards administrative costs of running CDM), while G77 countries want a minimum of 10 per cent.

3) A bracketed provision in the principles calls for equity with respect to per capita emissions. It affirms that parties will be guided by the principle that there is equity between developing and industrialised countries, and industrialised countries reduce their emissions with a view to reducing such per capita inequities. Affirms is not a strong enough word to express the importance of a recognition of per capita rights before trading, but it must be retained, if not further strengthened.

4) It is still not decided whether CDM funds have to be additional to just the current ODA flow, or to ODA targets. (Developed countries reaffirmed a commitment to contributing 0.7 per cent of their GDP to ODA during the Rio conference, though this commitment has never been met.) Provisions for technological additionality (technology transfer must be additional to existing commitments) and investment additionality (investments must be additional to business as usual investments) remain in brackets. Developing countries must demand all three.

5) It is still to be decided whether certified emissions reduction credits (CERs) will be fungible (whether industrialised countries can sell CERs once they have been bought from developing countries). This provision must be opposed (see story: The infection the South must avoid, Equity Watch, Special Edition # 1, November 15).

6) Some developing countries have apparently opposed public participation provisions in CDM projects. This is entirely unacceptable, and they should know better from experiences with World Bank and GEF projects.