Media Advisory - New report available on the market impact of a CDM capacity fund

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New report available on the market impact of a CDM capacity fund

(Bonn, 19 June 2013) – The secretariat of the United Nations Framework Convention on Climate Change (UNFCCC) would like to bring to your attention the release of a new report titled “The market impact of a CDM capacity fund”.

The paper, prepared with financial support from the UNFCCC secretariat, explores the possible market impact of a capacity fund for the Kyoto Protocol’s clean development mechanism (CDM). It investigates the impact of a fund focused on purchasing credits from existing projects, suggesting €2.5–€3.0 billion may be needed to have a fundamental impact on the supply–demand balance in the market, but that a smaller fund could still generate benefits.

The report also explores how a fund focused on purchasing credits from new projects might be designed; suggesting that placing a floor price in the market could be attractive. In closing, the report outlines the key considerations policymakers may wish to take into account if choosing between a fund to purchase credits from existing projects and credits from new projects.

“This is an important report, not only because it presents options for using a fund to stabilize CDM for the next several years, but because it highlights opportunities to enhance the contributions that this mechanism and carbon markets in general are making to mitigation efforts,” says Niclas Svenningsen, manager for strategy, collaboration, and communication in the climate change secretariat’s Sustainable Development Mechanisms programme.

A CDM capacity fund may also help to:

  • maintain carbon market infrastructure;
  • ensure the viability of existing CDM projects – and their emission reductions and sustainable development impacts;
  • provide an appropriate price to stimulate new mitigation action in developing countries;
  • protect the progress that the CDM has made towards a global carbon market.

The paper responds to the recommendation made in last year’s report by the High-Level Panel on the CDM Policy Dialogue (‘A Call to Action’) to consider establishing a CDM capacity fund. It is intended to contribute to ongoing dialogue with policymakers on this topic.

About the CDM
The clean development mechanism (CDM) allows emission-reduction projects in developing countries to earn certified emission reductions (CERs), each equivalent to one tonne of CO2. CERs can be traded and sold, and used by industrialized countries to meet a part of their emission reduction targets under the Kyoto Protocol. With more than 6,950 registered projects in 87 developing countries, the CDM has proven to be a powerful mechanism to deliver finance for emission-reduction projects and contribute to sustainable development.

About the UNFCCC
With 195 Parties, the United Nations Framework Convention on Climate Change (UNFCCC) has near universal membership and is the parent treaty of the 1997 Kyoto Protocol. The Kyoto Protocol has been ratified by 192 of the UNFCCC Parties. Under the Protocol, 37 States, consisting of highly industrialized countries and countries undergoing the process of transition to a market economy, have legally binding emission limitation and reduction commitments. The ultimate objective of both treaties is to stabilize greenhouse gas concentrations in the atmosphere at a level that will prevent dangerous human interference with the climate system.

See also:
http://cdm.unfccc.int
Twitter: @UN_CarbonMechs
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