1 DG Climate Action Unit B.3 International Carbon Market, Aviation and Maritime European Commission Development of carbon market and provisions for credits from Least Developed Countries in EU ETS and ESD

“Offsetting” alone cannot solve climate change problem... If Annex I alone reduces emissions to zero... Global emission path compatible with 2°C scenario

A vision: Concrete steps forward  Build an international carbon market  To drive investments and achieve mitigation objectives at least cost  To generate important financial flows to developing countries.  Concrete steps:  Link compatible domestic cap-and-trade systems to develop an OECD-wide market  New sector-wide market mechanisms for (advanced) DCs as a step towards cap-and-trade systems  Reform and better focus the CDM  Outcome from Cancun: positive developments (i.e. standardised baselines, CCS in CDM), but a lot of work ahead on new market mechanisms

A vision: carbon market transition Reformed CDM Sectoral crediting applied Emissions not covered by cap and trade Bilaterally linked cap and trade TIME Relative share of global emissions Increasing focus on LDCs Strengthen governance Strengthen environmental integrity

Provisions for credits from LDCs: EU ETS Directive EU ETS provides certainty on acceptance of credits from projects started in LDCs after 2012:  when these projects are clearly additional and contribute to sustainable development Article 11a 4 of Directive 2009/29/EC: Use of CERs and ERUs before entry into force of an international agreement on climate change To the extent that the levels of CER and ERU use, allowed to operators or aircraft operators by Member States for the period from 2008 to 2012, have not been used up or an entitlement to use credits is granted under paragraph 8, competent authorities shall allow operators to exchange CERs issued in respect of emission reductions from 2013 onwards for allowances from new projects started from 2013 onwards in LDCs LDC clearly defined:

Provisions on credits in the Effort Sharing Decision Member States should ensure that their policies for purchasing these credits enhance the equitable geographical distribution of projects, in particular by increasing the share of CERs purchased from LDCs and SIDS Article 5 of Effort Sharing Decision 406/2009/EC 5.1. Member States may use the following greenhouse gas emission reduction credits [..] (c) CERs issued in respect of emission reductions achieved from projects implemented in LDCs which were eligible for use in the Community scheme during the period from 2008 to 2012, until those countries have ratified a relevant agreement with the Community or until 2020, whichever is the earlier; 5.5. Member States* [..] allowed to use additional credits amounting to 1 % of their verified emissions in 2005 from projects in LDCs and SIDS each year, subject to compliance with one of the following four conditions [..] *Belgium, Denmark, Ireland, Spain, Italy, Cyprus, Luxembourg, Austria, Portugal, Slovenia, Finland, Sweden

Other opportunities  EU ETS:  particular priority should be given to addressing the needs of LDCs when revenues generated from auctioning are used to facilitate developing countries’ adaptation to the impacts of climate change  Global Climate Change Alliance:  Enhancing participation of LDCs and SIDS in the Clean Development Mechanism as one of the five priority areas  Proposed areas for intervention:  Increasing capacity-building for participation in the CDM, and providing technical support for cost-effective project development  Exploring options to showcase projects and project types that are better suited to the specific conditions in LDCs and SIDS, including through the development of methodologies for such projects

GCCA priorities ► Adapting to climate change ► Promoting disaster risk reduction ► Reducing emissions from deforestation and forest degradation (REDD) ► Enhancing developing countries’ participation in the Clean Development Mechanism (CDM) ► Integrating climate change into poverty reduction and development efforts

GCCA Progress to date Policy dialogue and Country Support  More than 30 countries/regions have received support since 2008 for a total amount of around € 200M  Several Joint Declarations on CC have been signed GCCA SF  Established in November 2009 with the objective of promoting and facilitating efficient implementation of the GCCA actions in target countries and regions (2.9 M € ).  Key tasks:  enhance policy dialogue between the EU and target countries/regions through organisation of high level seminars (e.g. Bangladesh and Addis in 2010)  assist in the identification and formulation of specific cooperation activities in beneficiary countries.  Provide training WS on integration of CC in countries ‘ policies and strategies

The GCCA 2010 Countries CountryDate Implementation modality Total cost of the Action Focus of intervention Belize2010 Contribution agreement with UNDP 2.9 The overall objective of this project is to enhance adaptive capacity and resilience to climate change in national policies, including the water sectors in Belize: 1. Increase national awareness for the effects of climate change; 2. Mainstream climate change adaptation into national development plans; and 3. Support implementation of the National Adaptation Strategy to Address Climate Change in the Water Sector Ethiopia2010 Indirect centralized manageme nt to AFD and GTZ 13.7 The overall objective is to contribute towards the construction of a carbon neutral and climate resilient economy.The specific objective is to increase the awareness and capacity of targeted Government institutions both at federal and regional levels and of the rural population at large to deal with climate change. Sustainable land use management and erosion control are the focus. Mozambique2010 Financing Agreement + Indirect centralized manageme nt with DANIDA 10.2 EC intervention will support the Government of Mozambique (GoM) in tackling the adverse effects of climate change, with a special focus on the most vulnerable communities in the rural areas of the country. Focus on agriculture and agroforestry sector Nepal2010 Financing Agreement + Indirect centralized manageme nt with DFID 8.6 Build capacity of Government of Nepal to develop, cost, budget and implement evidence-based policy and measures aimed at mainstreaming climate change in key development sectors (agriculture, forestry, water and energy). Main focus will be on watersheds and their management. Pacific Region2010 Contribution Agreement with SPC 11.4 Promote a long term/strategic approach to adaptation to CC planning and budgets and to pave the way towards more effective and coordinated aid delivery modalities at national and regional level in the sector of CC.

GCCA Pilot Countries 2011/2012 DirectionRegionCountry/Region Suggested indicative GCCA allocation (EUR million) 2011 Suggested indicative GCCA allocation (EUR million) 2012 C (ACP)AfricaMozambique3 to 5 C (ACP)AfricaEthiopia4 to 6 C (ACP)AfricaLiberia3 to 5 C (ACP)AfricaGambia3 to 4 C (ACP)AfricaBenin4,5 to 6 C (ACP)AfricaUganda7 to 11 C (ACP)AfricaSierra Leone4 to 5 C (ACP)AfricaMalawi 5 to 7 C (ACP)AfricaBurkina Faso 5 to 7 C (ACP)AfricaKenya To be decided C (ACP)AfricaDemocratic Republic of Congo To be decided C (ACP)AfricaBurundi To be decided C (ACP)Africa Eastern and Southern Africa (COMESA-SADC-EAC) or other subregional programme (e.g. CILSS or CEDEAO)