Prepared for Subsidiary Body for Implementation, 45th Session, COP22 7-18 November 2016
Carbon Market Watch welcomes the opportunity to provide input to the discussions on the review of the modalities and procedures for the Clean Development Mechanism (CDM) – SBI agenda item 7a.
While the Clean Development Mechanism plays no role in the Paris Agreement as such, the ongoing negotiations to review the modalities and procedures for the CDM remain important for a number of reasons:
The Paris Agreement established a new ‘mechanism to contribute to the mitigation of greenhouse gas emissions and support sustainable development’[1]– in short SDM. Anchored in Article 6 of the Agreement, the mechanism has a similar function to flexible mechanisms in the Kyoto Protocol and will likely draw from the experience as well as the modalities and procedures of the CDM.
Albeit limited, there is still a role for the CDM for the period up to 2020 and more generally, as a potential instrument to provide results based finance, provided the projects financed have a high level of environmental and social integrity and that double counting is avoided.
The need for safeguards and accountability processes to ensure that climate finance meets the needs of present and future generations and does not threaten human rights is widely recognized in international financial institutions (IFIs). Many multilateral development banks and institutions have in place policies and safeguards to prevent social and environmental harms in their investment. The GCF for example has requirements for new, additional, adequate and predictable financial resources to developing countries. This should not only address the type of finance but also extend to the type of projects and credits.
The parameters of financing institutions, such as the GCF, for results based finance (RBF) are much more encompassing and go beyond quantification of solely emission reductions, as is the case in the CDM.
In its current form, the CDM falls short of essential requirements for example, the CDM’s technology neutrality allows coal power plants to apply for CDM funding. Contrary to all other major climate finance mechanisms, the CDM does not have an accountability mechanism. In transitioning from the CDM to future mechanisms under the Paris Agreement it is an imperative to fundamentally reform the instrument, including technology eligibility assessments, do no harm safeguards, sustainable development indicators and the establishment of a grievance mechanism.
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