There are three 'flexibility mechanisms' under the Kyoto Protocol to the UNFCCC. These are:
• The Clean Development Mechanism (CDM), which allows
developed countries (Annex 1 countries) with emission caps to
undertake greenhouse gas emission reduction (or emission removal)
projects in developing countries where there are no emission caps,
in exchange for emissions credits
• Joint Implementation (JI) projects, where developed
countries undertake emission reduction projects in other developed
countries
• International emissions trading
CDM projects generate emission credits called Certified
Emissions Reduction (CER) units, where one CER is equivalent to one
tonne of CARBON DIOXIDE (CO2) or its equivalent for the other GREENHOUSE GASES. The CER units from these projects
are used to offset some domestic emissions in the industrialised
countries. They can also be traded or sold between countries.
Under the Kyoto Protocol, the aim of the CDM project is to
provide real, measurable and long-term benefits relating to the
mitigation of climate change. It must produce a reduction in
emissions that would not occur in the absence of the particular
project undertaken. This is known as the concept of
'additionality'. Article 12.2 of the Kyoto Protocol to the UNFCCC
states that the aim of CDM is to assist non-Annex I countries (developing
countries) to attain sustainable development through low-carbon
technology transfer, while assisting Annex I countries (developed countries) in
achieving their reduction commitments. This thus contributes to the
ultimate goal of preventing and arresting dangerous anthropogenic
interference with the climate system.
Article 12 of the Kyoto Protocol to the UNFCCC, and subsequent
accords, create three main requirements for CDM projects:
sustainable development, 'supplementarity' and 'additionality'. A
project must contribute to sustainable development in the host
country. However, the Kyoto Protocol provides little guidance on
the definition of sustainable development, relegating that policy
operational decision to each developing nation's project approval
authority. 'Supplementarity' requires that use of the flexibility
mechanisms be supplemental to domestic actions of mitigation, not
substitutional.
To date, more than 252 million CER units have been issued
globally, and to the end of 2012, a further 1.5 billion credits are
expected to be issued from registered CDM projects. These figures
are continually increasing as additional CDM projects are
registered and commence operation. More than 70 per cent of CDM
projects are hosted by China, India and Brazil (where China is the
clear leader), despite the fact that a total of 76 developing
countries participate in the scheme.
The most common projects involve renewable energy systems,
representing more than 60 per cent of expected CDM projects. Of
those and overall, hydropower is the most popular CDM project type,
closely followed by the production of biomass energy and wind power
plants. Although hydropower is the most popular CDM project type,
more emission reductions are accomplished through HFC (a potent greenhouse gas and by-product of
refrigerant gas production) emission reduction projects. There are
just 23 HFC projects, which together represent the biggest
reduction in greenhouse gas emissions, and therefore generate the
largest number of CERs, of any CDM project type. This is because
the destruction of HFC refrigerant gas is cheaper than other
projects for the produced emission reduction. Another important CDM
project type is the reduction of NITROUS OXIDE (N2O). Just 66
projects make this activity the fifth most important CDM project
type in terms of generated CER units. Global concern has arisen
over the predominance of HFC and N2O
reduction projects, in the context of the CDM, and has led to a
UNFCCC ruling against new HFC destruction CDM projects. The concern
is that the main greenhouse gases, namely CO2
and CH4, are not being
mitigated.
In contrast, the contributions of afforestation and
reforestation CDM activities are almost negligible, both in terms
of project numbers and emission reduction value. The first
small-scale afforestation project has only just recently been
registered by the CDM Executive Board. Some critics of the CDM
scheme have raised this as a weakness of the system. For other
weaknesses of the CDM and the possible changes being negotiated,
see the Library's publication The Kyoto Protocol's Clean Development
Mechanism.
In the context of Australian emissions trading, the Australian
Government’s policy position is to allow an unlimited number
of eligible international units to be accepted for CPRS compliance. It considers
that accepting international emissions credits has the potential to
control domestic costs, provide support for the international Kyoto
Protocol architecture, promote technology transfer, and facilitate
Australia’s involvement in international carbon markets.
The CDM seems to provide the opportunity for economic benefits
for trading partners, yet remains a problematic institutional
policy mechanism owing to its reported inefficiency, inequity, and
sustainable development concerns. It is therefore likely to be the
subject of significant attention at the fifteenth conference of the parties, which is
scheduled to be held in Copenhagen, Denmark between November 30 and
December 11, 2009.