1 Kai-Uwe Barani Schmidt Secretary CDM Executive Board Clean Development Mechanism Carbon Forum America 26 February 2008

2 Legal basis in the Kyoto Protocol –Run by Executive Board (EB) answerable to KP Parties –EB back-stopped by UNFCCC secretariat with support for: Registration and issuance Accreditation of certification companies Methodologies for emissions baseline setting and monitoring CDM general overview | International mandate

3 Additionality Define operationally what would happen in the absence of a CDM emission reduction project Two experts – two views Agreement how best to do it A challenge for any offset mechanism/market outside an inventory target based system CDM general overview | International challenge

4 Not an academic concept – CDM is up and running! CDM general overview | Worlds largest CO2 offset system 2 ½ years of operational experience (in the context of exponential growth!) 100,000,000 CERs issued at USD15 worth about 1.5billion - low global administration cost below 1% Large pool of learning opportunities

5 CDM general overview | Global reach 945 projects registered to date 49 countries 119 million certified emission reductions (CERs) issued approx. additional 2000 projects in pipeline 2.6 billion CERs expected to end of below 25 K CERs/y; 23 projects above 500 K/y

6 An explosion of project activities representing a broad range of project types and sizes CDM general overview | Strong demand

7 Stakholders say CDM is: A development tool – Executive Board should make it find development opportunities A market mechanism – it will find low-cost reductions on its own, guided by private sector interests/market forces CDM general overview | Competing views

8 Actually, CDM is both. It creates incentive for investment That assist in sustainable development and In lower cost opportunities for emission reduction CDM general overview | Creating incentive

9 A key challenge (imperative) is to maintain quality. Each CER must represent an emission reduction equivalent to one tonne of CO2, so that an emission can be offset, and done so cost effectively. The EB must strike a balance: Recognize the challenges/constraints faced by project proponents and engage in constructive dialogue with project proponents Ensure the public interest, the quality imperative, so that an offset produced does not result in an increase in emissions CDM general overview | CDM quality standard

10 CDM projects that entered pipeline in 2006 estimated to result in USD 25 billion in capital investment (almost double the USD 14 billion in total investment leveraged through GEF in the climate change area since it started more than 10 years ago) CDM renewable energy and energy efficiency projects registered in 2006 expected to result in USD 5.7 billion in capital investment (about triple the ODA support for energy policy and renewable energy projects in the same countries. Almost as much as private investment in renewable energy and energy efficiency (USD 6.5 billion in 2006) in the same countries) CDM general overview | Investment, financial flows Condensed from the report of the CDM Executive Board to the COP/MOP 2007, page 4.

11 CDM general overview | Investment, financial flows Most CDM projects are small Most are in energy industries (renewable/non-renewable) Projects in pipeline, by emission reductions (number of expected CERs) Registration pipeline >3000 projects (including registered projects)

12 CDM is new, but it has already shown that it can work, that it can evolve and adapt Whats more, stakeholders have direct influence on the evolution/improvement of CDM These facts, together with CDMs full transparency,* have earned the mechanism respect, has enabled CDM to weather misplaced criticism and benefit from constructive criticism * Virtually every document, related to every project, is available on the CDM website. CDM general overview | Transparency

13 Bears important lessons in how to establish additional emission reductions in a measurable and verifiable manner for use as offsets Moved offset concept to operation on a global scale Bears important lessons regarding bottom-up approach and participation Assists in sustainable development CDM general overview | Learning by doing CDM:

14 CDM Bazaar Catalogue of decisions (test): CDM UNFCCC website cdm.unfccc.int UNEP RISOE Thank You! We are here to interact. Drop in to our booth.