III. Market-Based Opportunities

Joint Implementation and Clean Development Mechanism

Joint Implementation (JI) is a program under the Kyoto Protocol that allows industrialized countries (Annex I Parties) to meet part of their required cuts in GHG emissions by paying for projects that reduce emissions in other industrialized countries. Sponsoring countries will receive credits that may be applied to their emissions targets, and recipient nations will gain foreign investment and technology. Industrialized countries must meet requirements like accurate inventories of GHG emissions and registries of emissions units and credits. If these requirements are not met, a JI project may still be pursued, but under a “second track” label that requires more international oversight.

The Clean Development Mechanism (CDM) is a similar program to JI in that industrialized countries pay for projects that cut or avoid emissions and are awarded credits that can be applied to meeting their own emissions targets. The only difference is that these projects are put in place in poorer countries, rather than industrialized countries. Recipient countries benefit from updated and more efficient technology while countries that earn the credits can apply them to meeting their emissions limits, bank them for later use, or sell them to other countries under the ETS. This program has also attracted interest and support from private firms and investors.

CDM provides an outlet for aid to developing countries from Annex I Parties with both an economic and eco-friendly incentive for both. However, further steps need to be taken in regulating the validity of projects and in enhancing public participation.

Strategies for long-term success

The amount of CDM projects is increasing exponentially and parties are preparing for emissions trading as 2008 nears. As use of the market mechanisms increases, appropriate measures need to be taken to ensure their long-term success in emission reductions environmentally and socially. In order for the CDM and JI to be effective, communities where projects are to be implemented need their voices heard. The current system with its short periods for public input is ineffective. Ample time and information must be provided to the public to voice their opinions. There must also be variety in the type of projects implemented, specifically in the form of renewable energy. A range of projects guarantees a cumulative, long-lasting, and environmentally sustainable reduction of emissions. It is more beneficial to have wind farms, forest conservation, and capture of bovine methane than a multitude of only landfill methane capture projects.

In the arena of the Emissions Trading System (ETS), supplements should be stressed. In order for ETS to remain a globally beneficial market mechanism and not a strategy to avoid domestic action, two things must be realized. First, emissions trading should be seen as a last resort for Parties unable to meet their commitments domestically. We must also promote sustainable development—in the form of JI projects—in economies in transition to better prepare them for future commitment periods.

Carbon Capture and Storage: Does it fit the bill?

The CDM must be kept a mechanism to reduce emissions through international assistance in sustainable development. The current trend in attempting to use the CDM simply as an economical escape from domestic emissions reductions is counter to the goal of the CDM “...to assist Parties not included in Annex I in achieving sustainable development...” as stated in Article 12 of the Protocol.

It is necessary that CDM projects are efficient, cost-effective, and transparent, and these qualifying mandates are continually being revisited. However, the issue of whether a project really promotes sustainable development through more than just the theme of emissions reductions has been ignored. Dangerous infringements based on the principle of sustainable development include the proposal to include Carbon Dioxide Carbon and Storage (CCS) in CDM projects. According to the IPCC report, the technology is available, but the appropriate sites for geological storage, according to the same report, are not. Insufficient language on seepage and documentation could result in insufficient remediation and the implementation of projects that are not expected to have the utmost permanence in carbon retention. Some Parties claim that CCS is more cost-effective than avoiding emissions, although there are currently only 4 CCS projects in the world, none of which involve fossil fuel production. The empirical evidence is not yet sufficient to warrant an experiment using the developing world as test subjects through the CDM. Additionally, CCS requires a power plant to increase its energy output by 10-40%. This raises the need for fossil fuel instead of diminishing it, creating further reliance. Financial assistance is better channeled towards alternative energy and more sustainable projects.

Additionally, the use of GMOs in A&R programs cannot be allowed. Market mechanisms should not reward states for treating host parties as test subjects.

Growth of CDM projects

According to the World Bank, in order to meet the goals of emission reduction under the Kyoto Protocol between 2008 and 2012, it will be necessary for 2,500 CDM projects to be implemented annually. The Executive Board, in its most recent report, claimed the number of CDM projects went from 37 to 252 in an eight-month period. The clarification and expediting of methodologies, as well as more funding for administration will help instigate the necessary rise in the number of projects. From the planning through the implementation of new projects, a concern for the welfare of host Parties must be present. If there is any scientific doubt about the safety or efficiency of a project, it should not be undertaken. The CDM shall require exponential growth in the forthcoming years. In order for the CDM to be a truly effective mechanism, the projects must be seen to have a benefit that is local as well as global. Efficient and effective projects with sustainable development a priority at least on par with emissions reductions are the future of the CDM.

The only CDM and JI projects that should be promoted are those that will provide a sustained and safe effective reduction of emissions. Emissions trading has dangerous potential for curbing domestic action and fostering a lack of sustainable development in economies in transition. For the purpose of providing access and equal distribution of Clean Development projects, the conference of the parties needs to make the CDM a mechanism accessible to non-Annex I countries by removing unnecessary bureaucratic obstacles. Market mechanisms are tools for international cooperation in development and emission reduction.

SustainUS believes that market mechanisms under the Kyoto Protocol offer strong support in meeting the goals of the Convention. However, projects registered under the CDM must guarantee environmental integrity in every project and that projects implemented will respect the livelihoods of communities in the developing world.