COP16 Decision on COP16 Decision on Market Mechanisms Market - - PowerPoint PPT Presentation

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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

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 Existing Kyoto mechanisms  Pending  Mechanisms under UNFCCC Decided to consider to establish

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Adopted guidelines for a loan scheme Adopted guidelines for a loan scheme

F di f th l h f i t t i Funding for the loan scheme from any interest accruing on 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 3 Loan may be written off, if the project is abandoned, fails to be registered under CDM process 3

Outline of the loan scheme Outline of the loan scheme

Transfer

CDM project CDM project

Repayment/ Reporting

UNFCCC UNFCCC UNFCCC UNFCCC Implementing Implementing Implementing Implementing

funds annually

p j participant p j participant

Developing Monitoring

UNFCCC UNFCCC Secretariat Secretariat UNFCCC UNFCCC Secretariat Secretariat agency agency agency agency CDM CDM CDM CDM

reporting p g PDD/Validation /Verification

CDM CDM Advisor Advisor Consultant/ Consultant/ CDM CDM Advisor Advisor Consultant/ Consultant/

reporting Disbursement Consultant/

Consultant/ DOE DOE Consultant/ Consultant/ DOE DOE

Implementing agency may request the secretariat to withhold

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Implementing agency may request the secretariat to withhold CERs issued until the repayment is complete

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 d t i ti f dditi lit f CDM determination of additionality for CDM Parties, project participants, admitted observer

• rganizations through the host country’s DNA may submit
• rganizations 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 U d t d j t ti it t i ti l l f Underrepresented project activity types or regions, particularly, for energy generation in isolate systems, transport and agriculture  Development costs for CDM can be reduced

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 Development costs for CDM can be reduced  Objectivity and predictability of CDM process will be increased

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Process to develop standardized BL Process to develop standardized BL

CDM EB CDM EB CDM EB CDM EB Approval/Review

Process to develop standardized BL Process to develop standardized BL

CDM EB CDM EB CDM EB CDM EB

B li i d l l ti f it

Approval/Review

Standardized Baseline

Baseline scenario and calculation for its emission are standardized

• Ex. Usage of incandescent lamp and its

i i

Cons Prop Prop

emissions

Judgment for addtionality is standardized

E Diff i t f fl t l i l

sultatio posal posal

• Ex. Diffusion rate of fluorescent lamp is less

than 5%

• n

Party Party （DNA DNA） Party Party （DNA DNA）

Industry Industry Organization/ Organization/ Admitted Observer Admitted Observer Industry Industry Organization/ Organization/ Admitted Observer Admitted Observer

Proposal

Project Project Participants Participants Project Project Participants Participants

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（ ） （ ）

Admitted Observer Admitted Observer

• rganization
• rganization

Admitted Observer Admitted Observer

• rganization
• rganization

Proposal

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 f bl d ffi i j t MW of renewable energy and energy efficiency projects 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 7

 Significant implication for development of CDM projects in

LDCs 7

CCS is eligible as CDM CCS is eligible as CDM g

Long controversial issue since CMP2 in 2006 Oil d i t i N A t li Oil producing countries, Norway, Australia, 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 monitoring plan project boundaries project Issues indentified：Site selection, stringent monitoring plan project boundaries project monitoring plan, project boundaries, project emissions, risk and safety assessment, long-term liability for potential leakage and seepage potential monitoring plan, project boundaries, project emissions, risk and safety assessment, long-term liability for potential leakage and seepage potential

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liability for potential leakage and seepage, potential risk of CO2 release etc. liability for potential leakage and seepage, potential risk of CO2 release etc.

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 t dd i ifi t d fi i i i lid ti to address significant deficiencies in validation or 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

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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

• n voluntarily contribution of Parties
• n voluntarily contribution of Parties

These new charging fees can contribute to financial independence of JISC

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financial independence of JISC

Future operation of JI in Post Future operation of JI in Post-2012 2012 utu e ope at o

• J
• st

utu e ope at o

• J
• st

What would be a future operation of JI project in p p j post-2012 period if there is a gap?

2012 2012 2008 2008 G i d G i d G i d G i d 2015? 2015? 1st

st c.p

c.p 2nd

nd c.p

c.p? ? Gap period Gap period Gap period Gap period Reduction occurred during the gap period by JI project may not produce ERUs since AAUs are ll d A I i

Just take note the view of the need for a

not allocated to Annex I countries

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Just take note the view of the need for a future operation of JI after 1st c.p

Difference between CDM and JI in post Difference between CDM and JI in post-

• 2012

2012 period period Many voices for a continuation of CDM（None Many voices for a continuation of CDM（None

• f the Parties disagrees CDM itself）

CER ill b d d f CDM j t i CERs will be produced from CDM projects in post-2012 period, whereas the crediting period

2008 2008 2012 2012

• f JI is limited to 5 years (2008 – 2012)

CDM CDM CDM CDM 2008 2008 2012 2012 1st

st c.p

c.p C diti i d C diti i d（10 10 t 21 t 21 ） C diti i d C diti i d（10 10 t 21 t 21 ） CDM CDM CDM CDM JI JI JI JI Crediting period Crediting period（10 10 to 21 years to 21 years） Crediting period Crediting period（10 10 to 21 years to 21 years） Crediting period Crediting period Crediting period Crediting period

12 12

JI JI JI JI g p g p （5 years 5 years） g p g p （5 years 5 years）

Future operation of market mechanisms Future operation of market mechanisms

Kyoto Protocol Kyoto Protocol Kyoto Protocol Kyoto Protocol UNFCCC UNFCCC UNFCCC UNFCCC （AWG AWG-

• KP

KP）

Options for CDM Options for CDM N l C N l C b fit b fit

（AWG AWG-

• KP

KP）

Options for CDM Options for CDM N l C N l C b fit b fit

（AWG AWG-

• LCA

LCA）

Decided to consider the Decided to consider the t bli h t f t bli h t f

（AWG AWG-

• LCA

LCA）

Decided to consider the Decided to consider the t bli h t f t bli h t f Nuclear, Co Nuclear, Co-

• benefit,

benefit, CER CER discounted etc. discounted etc. Options for JI Options for JI Nuclear, Co Nuclear, Co-

• benefit,

benefit, CER CER discounted etc. discounted etc. Options for JI Options for JI establishment of one or establishment of one or more market mechanisms more market mechanisms Agreed to maintain and Agreed to maintain and establishment of one or establishment of one or more market mechanisms more market mechanisms Agreed to maintain and Agreed to maintain and Options for JI Options for JI Nuclear, Co Nuclear, Co-

• benefit

benefit Others Others Options for JI Options for JI Nuclear, Co Nuclear, Co-

• benefit

benefit Others Others Agreed to maintain and Agreed to maintain and build upon existing build upon existing mechanisms including mechanisms including Agreed to maintain and Agreed to maintain and build upon existing build upon existing mechanisms including mechanisms including Carry Carry-

• over, charging fee
• ver, charging fee

for AAUs and RMUs, for AAUs and RMUs, Ne market based Ne market based Carry Carry-

• over, charging fee
• ver, charging fee

for AAUs and RMUs, for AAUs and RMUs, Ne market based Ne market based Kyoto mechanisms (CDM Kyoto mechanisms (CDM and JI) and JI) AWG AWG LCA l b t LCA l b t Kyoto mechanisms (CDM Kyoto mechanisms (CDM and JI) and JI) AWG AWG LCA l b t LCA l b t New market based New market based mechanisms, mechanisms, supplementarity supplementarity New market based New market based mechanisms, mechanisms, supplementarity supplementarity AWG AWG-LCA elaborates LCA elaborates the mechanisms for the mechanisms for CMP7 decisions CMP7 decisions AWG AWG-LCA elaborates LCA elaborates the mechanisms for the mechanisms for CMP7 decisions CMP7 decisions 13 13 supplementarity supplementarity supplementarity supplementarity CMP7 decisions CMP7 decisions CMP7 decisions CMP7 decisions

 Not agreed Not agreed  Agreed Agreed

Market mechanisms decided Market mechanisms decided by AWG by AWG-

• LCA

LCA

Decided to consider the establishment of one Decided to consider the establishment of one

• r more market
• r more market-
• based mechanisms (

based mechanisms (para para 80) 80) Decided to consider the establishment of one Decided to consider the establishment of one

• r more market
• r more market-
• based mechanisms (

based mechanisms (para para 80) 80) (p ) Ensuring voluntary participation of Parties Complementing other means of support for (p ) Ensuring voluntary participation of Parties Complementing other means of support for p g pp NAMAs by developing Parties Safeguarding environmental integrity p g pp NAMAs by developing Parties Safeguarding environmental integrity g g g y Ensuring a net decrease and/or avoidance of global GHG emissions g g g y Ensuring a net decrease and/or avoidance of global GHG emissions g Assisting developed Parties to meet part of their mitigation targets g Assisting developed Parties to meet part of their mitigation targets

14 14

g g g g

Possible scenarios under post Possible scenarios under post-

• 2012 regime

2012 regime

AWG AWG KP KP AWG AWG KP KP

AWG AWG-KP KP AWG AWG-KP KP

AWG AWG LCA LCA AWG AWG LCA LCA

Scenarios 1 Scenarios 1 Scenarios 2 Scenarios 2 Scenarios 3 Scenarios 3

AWG AWG-KP KP AWG AWG-KP KP

AWG AWG-KP KP +AWG AWG-

• LCA

LCA AWG AWG-KP KP +AWG AWG-

• LCA

LCA

AWG AWG-LCA LCA

Pl d & Pl d &

AWG AWG-LCA LCA

Pl d & Pl d &

AAU AAU AAU AAU

AAUs AAUs+

Pl d & Pl d &

AAUs AAUs+

Pl d & Pl d & Pledge & Pledge & Review Review

+

Pledge & Pledge & Review Review

+

AAUs AAUs

+

AAUs AAUs

+ Pledge & Pledge & Review Review CDM CDM+JI+IET +JI+IET Pledge & Pledge & Review Review CDM CDM+JI+IET +JI+IET

+ New Market New Market Mechanisms Mechanisms + New Market New Market Mechanisms Mechanisms

CDM CDM+JI+IET +JI+IET CDM CDM+JI+IET +JI+IET CDM CDM+JI+IET +JI+IET

New Market New Market Mechanisms Mechanisms

CDM CDM+JI+IET +JI+IET

New Market New Market Mechanisms Mechanisms Mechanisms Mechanisms (build upon build upon CDM? CDM?) Mechanisms Mechanisms (build upon build upon CDM? CDM?) Mechanisms Mechanisms Mechanisms Mechanisms CDM will be utilized for any scenarios CDM will be utilized for any scenarios JI d IET ill b tili d if AAU ll t d d KP JI d IET ill b tili d if AAU ll t d d KP 15 JI and IET will be utilized if AAUs are allocated under KP JI and IET will be utilized if AAUs are allocated under KP New market mechanisms can be co New market mechanisms can be co-

• exist with CDM

exist with CDM