Compilation and analysis of available information on ways and means to enhance equitable regional and subregional distribution of projects under the clean development mechanism FCCC/KP/CMP/2008/INF.2 Sustainable Development Mechanisms Programme UNFCCC

Contents | Key elements of the document INF.2 1.Status of the CDM 2.Current distribution of CDM project activities 3.Barriers to improved project distribution 4.Principles and roles for the improvement of project distribution 5.Actions taken to improve project distribution 6.The Nairobi Framework and the CDM Bazaar 7.Potential actions to improve project distribution

1181 registered CDM projects > 1.3 billion CERs expected to the end of 2012 (assumption: no extension of crediting periods) STATUS OF THE CDM | MEASURING SUCCESS Map and statistics accessible from Status: 17 October 2008 To date: > 4,000 projects > 2.7 billion CERs expected to the end of 2012 In pipeline:

INF.2 | Current distribution of CDM project activities

INF.2 | The current pipeline Note: The number of projects in the pipeline can be lower taking into account projects that are at validation and may not be submitted

INF.2| Barriers to improved project distribution Financial barriers –Access to funding for capital investment and upfront transaction costs, insufficient means to manage project risk Structural and institutional barriers –Insufficient capacity in host Parties, national legislative and policy frameworks in host Parties, restrictions on investment and purchasing decisions, insufficient access to funds for capacity building

ISSUES| Barriers to improved project distribution (2) CDM-specific capacity barriers –Insufficient capacity in policymakers, DNA staff members, project developers, local experts CDM process barriers –Issues relating to guidance provided by the CMP or the EB, issues with methodologies Uncertainty about the modalities of the continuation of the CDM after 2012 –Parties indicated that Kyoto mechanisms should continue

INF.2| Principles for the improvement of project distribution Assessments of the regional and subregional distribution of projects under the CDM often emphasize the context of the market in which the mechanism operates As the CDM is a market-based instrument, it is often stressed that the private sector will naturally gravitate towards low-risk, high opportunity locations and projects The factors influencing foreign and domestic investment decisions also apply to investments made through the CDM

INF.2| Principles for the improvement of project distribution The CDM EB has identified the following principles for it to keep in mind when considering the issue of regional distribution of CDM projects: –Each non-Annex I Party should have an opportunity to realize its full potential to access the opportunities offered by the CDM, especially and with particular attention to African countries and SIDS; –The term “equitable distribution” should not be taken to mean equal distribution of CDM project activities (e.g. the same number of projects in each country; the same mix of small- or large-scale projects; an equal number of CERs generated; etc).

INF.2| Roles for the improvement of project distribution

INF.2| Actions taken to improve project distribution In its report to the CMP.2, the EB highlighted decisions it had taken: –Simplified modalities and procedures for small- scale projects; –Removal of the registration fee for projects that achieve fewer than 15,000 t CO2 eq of emission reductions per year; –Lower share of proceeds for the first 15,000 CERs issued per year; –Differentiation in the method of payment for the application fee for applicant entities from non-Annex I Parties; –Establishment of the Designated National Authorities Forum (DNA Forum); –Participation in subregional and global capacity-building events or awareness-raising activities; –Establishment of the CDM Bazaar.

INF.2| Actions taken to improve project distribution In its report to CMP.3, the EB noted the progress in this area: –The CDM Bazaar had been launched to provide a web-based information exchange platform for all CDM stakeholders; –Two meetings of the DNA Forum had been held, including one in Addis Ababa, Ethiopia with a focus on the Africa region; –The Nairobi Framework had been launched by the Secretary- General during CMP.2 to bring together UNDP, UNEP, the World Bank, the African Development Bank and the UNFCCC secretariat, with the specific target of helping developing countries, especially in sub-Saharan Africa, to improve their participation in the CDM; –Several Parties had undertaken activities to broaden the participation of different stakeholders in the CDM process and to address barriers, notably in the area of capacity-building. These efforts are being complemented by South–South cooperation; –The EB had provided guidance on CDM PoA, as well as procedures for their registration and issuance, as a step to facilitates access to the CDM and reduces transaction costs. CMP.3 abolished the payment of the registration fee and share of proceeds at issuance for CDM projects hosted in LDCs

Announced at COP/MOP2 by the UN SG Partners: UNFCCC, UNDP, UNEP, AfDB and WB New: UN ECA Web page CDM DNA Forum Africa – Addis Ababa in October 2007 New joint project proposal launched in Bali (Activity can start when funding is available) First all- Africa Carbon Forum held in Senegal, September 2008 Focus of the Framework : Build capacity in developing CDM project activities Build and enhance capacity of CDM DNAs to become fully operational Promote investment opportunities for projects Improve information sharing / outreach / education and training Inter-agency coordination Nairobi Framework | To catalyze CDM in Africa

The CDM Bazaar |

INF.2| Potential actions to improve project distribution Actions to address financial barriers –Upfront funding for project development (positive experiences with international carbon funds) –Guaranteeing investments in projects (insurances to cover CERs delivery) –Matching finance to projects (enhance the CDM Bazaar) Actions to address structural and institutional barriers –Enhancing capacity-building activities under the DNA Forum (actions already planned for the Forum) –Enhancing capacity-building for national legislative and policy frameworks (Nairobi Framework,establishing CDM national committees) –Broadening of investment criteria (CDM programmes and carbon funds could be encouraged to dedicate a portion of their CDM investment to specific host Parties)

INF.2| Potential actions to improve project distribution Actions to address specific capacity barriers –Enhancing targeted capacity-building for local project developers and support services (establishing regional centres of excellence that could provide targeted capacity- building at regional and local levels) –Enhancing targeted capacity-building for local financial institutions (specific training or seminars) Actions to address remaining process barriers –Provision of additional guidance on the clean development mechanism (EB on-going work and its annual recommendations to CMP) –Provision of additional methodologies (concentrate work on methodologies and parameters that are particularly relevant to circumstances in non-Annex I Parties which are currently under-represented in the CDM, prepare PDD templates)

FCCC/KP/CMP/2008/INF.2 | THANK YOU Sustainable Development Mechanisms UNFCCC CDM Bazaar Catalogue of decisions: Information cdm.unfccc.int