The CDM: a review of its development and status of the carbon markets Dr. Oscar Coto II National CDM Workshop Belize August 2011
Dec 14, 2015
The CDM: a review of its development and status of the
carbon markets
Dr. Oscar Coto
II National CDM Workshop
Belize
August 2011
Topics
1. Responses to climate change and the CDM
2. Current trends in the CDM
3. Status of the carbon markets and expectations
Responses based on international and local levels, efficient and effective, with equity
both in
Mitigation as well as Adaptation
Responding to Climate Change
• Long and complex international negotiations
• UNFCCC in 1992
• The Kyoto Protocol in 1997
• On-going negotiations and dilemmas
Carbon Financing
• Area of environmental financing
• Explores implications of living in a carbon constrained world, emissions of GHG carry a price due to externalities
• Apply to emission reductions projects and associated transactions under the carbon markets
Carbon Markets
3main markets in existence
Voluntary emission reduction certificates
Emission allowancesProject based emission reductions
certificates
ChicagoClimateExchange New South Wales
Certificates.12
Carbon Markets
CDM2.7
EU ETS Allowances
118.5
Voluntary.34
SecondaryCDM
17.5
JI.35
.05
-59% +18%
Assigned Amount Units
2.0
RGGI
2.2
-33%
+1000%
+626%
(US$ billions)
Projects
Allowances
¿Then, What is it?
• Global effort to resolve an issue of public interest through application of a market based mechanism
• Supply of CERs located in the developing world can be bought by developed countries for their assumed compliance
• Based on principles of cost effectiveness for the develop world and contribution to sustainable development in the developing world
• Aiming at contributing to the objectives of the UNFCCC (stabilization of GHG concentrations
• Several types of implications
Recent trends 0
- 5
5 -
10
10
- 2
5
25
- 6
0
60
- 1
00
10
0 -
50
0
50
0 -
10
00
10
00
- 5
00
0
50
00
- 1
00
00
> 1
00
00
0
500
1000
1500
2000
2500
Number of projects with in different size intervals
ktCO2 per year
Nu
mb
er
of
pro
jec
ts
Q1
-04
Q3
-04
Q1
-05
Q3
-05
Q1
-06
Q3
-06
Q1
-07
Q3
-07
Q1
-08
Q3
-08
Q1
-09
Q3
-09
Q1
-10
Q3
-10
Q1
-11
0
10
20
30
40
50
60
70
New project in Latin America entering the pipeline each quarter
Latin America
Brazil
Mexico
Pro
ject
s
CDM trends
• Decreases over the last 2 years (lower demand, regulatory uncertainty, competition)
• Still important activity in project formulation
CER post 2012 high quality vintage
6-7 Euro
CER futures with a medium risk
7-8.5 Euro
CER futures with low risk 8.5-10 Euro
CER registered CDM projects
10,5-11 Euro
CER spot market 9.33 Euros
CDM CER prices
Source CDM Highlights, GIZ (July 2011)
Relationship between
investment and net present
value of carbon contract for
different types of projects
(World Bank experience)
What is going on with the CDM?
• Regulatory decisions out of COP 16 in Cancun
• Expectations from market players
Decisions related to CDM
• Regional distribution• Integrity of the CDM and its requirements• Objectivity, efficiency of the CDM and its
requirements• Enhance transparency of the CDM• Out reach• Simplification and standardization• Inclusion of CCS in CDM (Decision 7/CMP.6)