28 nov. 2012

In the Kyoto protocol, there are flexible market mechanisms allowing countries to abate efficiently in theory. In practice, these projects are only marginally, at best, contributing to a net reduction in emissions. Some argue that the Clean Development Mechanism (CDM), that allow developed countries to support development projects in developing countries. The project is supposed to replace a project that uses energy inefficiently or contribute to global warming with a project that makes use of modern clean technology. This can happen on a small or larger scale. Following the negotiations right now about the Clean Development Mechanism many countries raise their concerns about the lack of demand for projects. Prices have plummeted because there is an over-supply of projects. This is a direct cause of the low mitigation targets proposed for the current commitment period. Countries such as Venezuela are now urging an augmentation of mitigation targets to ensure that the CDM can function. New Zealand, that is not signing the second commitment period of the Kyoto Protocol that is being negotiated in Doha, proposes that they should also be able to access the projects. The Bingos, the business community represented within the negotiations, call for reforms of the CDM to ensure its continuity. As I see it, the main problem that will prevent the effective functioning of the CDM is low mitigation commitments during a second Kyoto period will sustain low demand and low prices. When the cost of a project is higher than the return (possible profit generated and payment from a develop country) there is no economic incentive to undertake the project. A possible solution is to let non-parties to the Protocol access the mechanism. This could potentially boost demand. On the other hand, such countries have no legally binding mitigation targets and are therefore unlikely to make much use of the CDM. More updates on this soon!

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