29-12-2012, 07:00 PM
An Implementation Guide to the Clean Development Mechanism
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Background
In 1992 over 180 countries at the "Earth Summit" in Rio de Janeiro adopted the United
Nations Framework Convention on Climate Change (UNFCCC). The UNFCCC is a legal
framework that enables Parties to the Convention to start the process of stabilizing
greenhouse gases (GHGs) in the atmosphere. Parties to the UNFCCC have been meeting
every year since 1994 to implement and define this framework. At the third meeting of the
Parties, COP 3, the Kyoto Protocol was adopted and set legally binding GHG reductions for
industrialized countries, or so-called Annex I Parties. The Kyoto Protocol enters into force
when at least 55 countries ratify the treaty and these countries represent at least 55 per cent of
the Annex I countries' 1990 emissions levels.1 In time for the first compliance period (2008-
2012), Annex I Parties will have to encourage or regulate private companies and individuals
to reduce GHG emissions. Most of these reductions will occur within the borders of each
Annex I country, but the Kyoto Protocol identifies mechanisms by which credit can be
received for GHG reduction projects in non-Annex I countries.
The Clean Development Mechanism (CDM) is one of three "flexibility mechanisms"
identified in the Kyoto Protocol that participating countries can use to meet their GHG
reduction targets.2 The CDM is the only mechanism under the Kyoto Protocol that involves
developing countries, or non-Annex I countries. Article 12 of the Kyoto Protocol allows
developed countries and countries with economies in transition (see table 1) to meet their
greenhouse gas reduction commitments by engaging in CDM projects that reduce GHG
emissions. Developing, or non-Annex I, countries that have ratified the Kyoto Protocol can
benefit from these CDM projects to promote sustainable development. Annex I countries, in
return, receive certified emission reduction (CERs) credits for investing in CDM projects in
non-Annex I countries, which can be used against their GHG reduction commitments under
the Kyoto Protocol.
The CDM
The purpose of the CDM is to benefit both the investor and host countries by contributing
to sustainable development in the host developing countries and by allowing investor
countries to meet their GHG reduction targets at the lowest possible cost by taking advantage
of the lower marginal cost of reducing GHG emissions in developing countries. It is the sole
prerogative of the host country to confirm whether the project contributes to its sustainable
development. Annex I countries that have ratified the Kyoto Protocol can engage in projects
in developing countries to reduce any combination of six greenhouse gases (table 1). The
CER is then received by the Annex I investor to use to comply with its emission reduction
targets.
What are CDM projects?
Greenhouse gases (GHGs)
mix uniformly in the atmosphere,
making it possible to reduce
emissions at any point on the
planet and have the same effect.
This fact enables countries
pursuing GHG reductions to do so
where they can be reduced at
lower costs. CDM projects allow
entities in Annex I countries that
have ratified the Kyoto Protocol
to invest in projects that reduce
GHGs in non-Annex I countries
while contributing to sustainable
development. By investing in
non-Annex I countries, investors
from Annex I countries can earn
certified emissions reductions
(CERs) that can be used to meet
GHG reduction commitments
under the Kyoto Protocol. Thus,
CDM projects help both
developed and developing
countries work together to
achieve sustainable development
and decrease GHG emissions.