1. Role of the Carbon Markets in Harnessing Ambition for Closing the pre-2020 Gap Hugh Sealy, Chair, CDM Executive Board Latin American and Caribbean Carbon Forum Bogota, 4 September 2014

2. Context UNEP’s report estimates the mitigation gap until 2020 to be at least 20 billion tons of CO2. Preferred measures currently undertaken by governments and regions are carbon pricing instruments, including carbon markets. The CDM’s infrastructure works, and is the only global tool currently in use. The CDM has done what it was set up to do: mobilize investment in developing countries, support low-carbon development and reducing the cost of mitigation. 2

3. Some CDM numbers CDM projects registered: 7538 (+262 PoA) Active (issuing) projects: ~2600 CERs issued: 1.47 billion Available supply (snap shot of): ~430 million Potential supply from all registered CDM projects accumulated until 2020: ~8 billion CER Pre-2020 ambition gap: at least 20 billion tonnes CO 2 eqv 3

4. The CDM provides ready-made infrastructure 4 Proven Monitoring, Verification, and Reporting rules and processes with Third-party validators / verifiers Designated national authorities in over 125 developing countries 4 regional collaboration centres: Bogota, Kampala, Lomé, St. George’s Project developers, consultants, experts Over 200 project methodologies Internal support capacity within the UNFCCC secretariat Legacy benefits are in place on the ground (e.g. technology, capacity, interest in mitigating emissions) Seamless tracking and accounting of credits

5. Voluntary cancellation of CERs The use of CERs is not limited to compliance markets Concept of “voluntary cancellation” = effective removal of a CER from further use or transfer. Voluntary cancellation can be done for a number of reasons: Increase de facto mitigation Support to developing countries (finance, technology, capacity building etc) Support to specific sectors/countries/projects Contribute to closing pre-2020 ambition gap Preserve investors’ confidence in UNFCCC mandated mechanisms Become climate neutral Make good business sense Incentivize clean development 5

6. Towards a 2015 Global Climate Agreement Market approaches are prominent in low cost initiatives to mitigate climate change … and are being pursued in constituencies around the world. The CDM has over 9 years of experience “by learning by doing” and is ready to contribute. The 2015 agreement should include carbon markets in its mitigation tool box. 6

7. We have the supply: Voluntary cancellation of CERs could reduce the emissions gap significantly. We have the technical systems: Methodologies, established registration and issuance processes, MRV of effort, registry/tracking etc. We have unrestricted access: all Convention Parties and the private sector can voluntarily cancel CERs We have pledged the money: the necessary levels of financial support have already been pledged What we need is ambition to close the gap! Final thoughts 7

8. Thank you