The CDM Executive Board (EB) has today missed an important opportunity to provide clarity on the future of emissions reductions projects operating under the Clean Development Mechanism (CDM).
At the end of its latest meeting, the EB decided to postpone a decision on requests to renew the crediting period to assure continued operation after 2020. Following CDM EB procedures, three of the body’s members had requested a review of the requests for additional crediting periods.
The EB was scheduled to decide whether to accept the requests, which would allow registered projects to continue beyond the second commitment period of the Kyoto Protocol that ends this December.
“Investors and project developers are facing a dire situation whereby they have extreme uncertainty on what will happen to their projects and investments from January 1, 2021,” said IETA CEO Dirk Forrister. “This in turn will have direct impact on the continuation of projects and creates a heightened risk of project suspensions in various countries”.
Since COVID-19 concerns forced the postponement of COP26 to November 2021, there is currently no opportunity for Parties to the Kyoto Protocol to reach conclusions on how the CDM will operate from January 1, 2021 and, consequently, whether projects and programmes of activities (PoAs) will be able to extend crediting periods and issue certified emission reductions (CERs) credits.
IETA had urged the EB to adopt temporary measures for current rules to continue without change during 2021, given the extreme circumstance of the COVID-19 pandemic.
“Considering the current exceptional circumstances, we had hoped the EB would do everything within its powers to avoid disruption of the CDM while waiting for a political decision on this issue at COP26,” said Forrister.
But during its meeting, the CDM EB failed to agree on a remedy and deferred the issue to a future meeting.
Some members of the CDM EB have questioned whether the CDM can continue to operate and issue credits from January 1, 2020, highlighting technical challenges such as global warming factors and issuance codes, arguing that such a decision is outside the CDM EB mandate.
“We urge the CDM EB to provide clarity on this issue and to take the necessary interim measures to ensure that, at a minimum, CDM projects and PoAs can continue to operate and issue CERs accordingly until a decision is taken at COP26,” Forrister said.
This uncertainty is happening at a time when interest in voluntary markets is growing. A troubled CDM, coupled with the gap caused by delays in the operationalisation of the Paris Agreement’s Article 6.4 mechanism, could have a detrimental effect on business confidence in the UN crediting mechanisms.
“We’ve been hoping for months to get clarity on how the CDM would operate in the interim,” said Stefano De Clara, IETA’s International Policy Director. “Instead, we are concerned that the signals we are receiving from the EB may go in the opposite direction and cause harm to CDM operations.”
“This situation is eroding business confidence in the CDM and in future emission reduction mechanisms operated under the UNFCCC,” De Clara added.