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UN CDM ‘suffering from lack of demand’

05 Jun 2013 12:38 (+01:00 GMT)
UN CDM 'suffering from lack of demand'

London, 5 June (Argus) — The UN clean development mechanism (CDM) is suffering because of a lack of demand rather than because it is oversupplied with credits, the CDM executive board (EB) emphasised at a briefing on the sidelines of UN climate talks in Bonn, Germany.

“This is a problem of demand,” CDM EB chairman Peer Stiansen said. “I refuse to see the price situation as a consequence of the supply we provided as a board,” he said.

The CDM has so far generated certified emission reduction (CER) units that are only “a small fraction” of the projected cuts required to keep countries' stated 2°C temperature limit within reach, Stiansen said. “The argument has always been that markets need to be scaled up and supply more,” vice-chair Hugh Sealy added.

The CDM has almost 7,000 registered projects across 86 countries, Stiansen said. Approximately 1.3bn CERs have been issued compared with the projected 8bn-14bn t of extra emission reductions by 2020 identified by the UN Environment Programme (UNEP) as needed by 2020 to keep the world on track to stay under the 2°C limit, he explained.

“We are concerned” at the low price levels and lack of incentives for project developers, Stiansen said. “We have put forward these concerns” to the countries. “It is up to them to do something about it,” he said. Currently “only a handful of projects” are being submitted every week for validation, Stiansen noted.

But according to CDM market watchdog Carbon Market Watch, countries not only need to raise their mitigation targets to help stimulate demand, but the CDM also requires fundamental reform in terms of additionality to better guarantee the integrity of the CERs being issued.

Board members present at the briefing dismissed suggestions that additionality rules are too lenient. “I categorically reject that we have not cleaned up our act and that there are projects going through now that are not additional,” Sealy said.

CDM board members were unanimous that their role is not to manage or intervene in the CDM market, but rather to oversee the way it operates. The decision to extend the Kyoto protocol into a second commitment period has provided the CDM with some much-needed legal certainty, Stiansen said. At the same time, there is also an opportunity to generate extra demand from the voluntary market. “We would welcome a lot more of that,” Stiansen said.

Nonetheless, the EB admitted that it is making cutbacks in its support services as a result of the depressed state of the CDM. “We are trying to maintain a balance because we believe we have to maintain a core capacity” for when the CDM market recovers, Sealy said.

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