Role of the Carbon Markets in Harnessing Ambition for Closing the pre-2020 Gap

Hugh Sealy, Chair, CDM Executive BoardLatin American and Caribbean Carbon ForumBogota, 4 September 2014

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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.

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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 CO2 eqv

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The CDM provides ready-made infrastructure

• 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

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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

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 agreementshould include carbon markets in its mitigation tool box.

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• 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

Thank you