This discussion paper provides an overview of the challenges faced by the Clean Development Mechanism (CDM). It goes on to outline how CDM can be improved and enhanced for the post-2012 climate regime by introducing CDM "with atmospheric benefits". This means that fewer Certified Emission Reduction Units (CERs) would be issued or used compared to the level of emission reductions achieved through a CDM project. The study explores the environmental effectiveness, practical feasibility and political acceptability of CDM "with atmospheric benefits" and lists the sectors that are currently under-represented in the CDM network.Key questions posed in this study ask:
what possible reforms can the introduction of a CDM “with atmospheric benefits” result in?
can CDM "with atmospheric benefits" effectively be part of a new global carbon market developed as the Kyoto response towards mitigation of global warming in developing countries?
Major findings of this study are charted with a range of options for CDM "with atmospheric benefits". These include:
the introduction of a CDM with atmospheric benefits could increase the global GHG abatement efforts. Whether this enhanced GHG abatement occurs in developing or in industrialised countries depends on the principle of “supplementarity”.
the introduction of a CDM with atmospheric benefits increases the global mitigation costs. However, if the global GHG abatement efforts are fully financed by industrialised countries through the purchase of CERs at higher prices, it will increase domestic mitigation.
CDM with atmospheric benefits could also be regarded as a means to implement the principle that the use of the CDM should be supplemental to domestic action.
CDM could be used as an alternative or supplement to the current limits on the use of CERs in regional emissions trading schemes.
CDM beyond a pure offsetting mechanism could also help enhance the environmental integrity of the CDM. This has been identified by Parties to the UNFCCC as a key objective for any reforms to the CDM.
the important advantage of a CDM with atmospheric benefits is that it allows for the continuation of an established mechanism with an established public and private infrastructure.
To conclude, the authors emphasise the need for further research on areas relating to a quantitative analysis of the implications of different discount rates on the global mitigation effort and the geographical distribution of CDM projects.