Stanford Program on Energy and Sustainable Development Presents ... Promoting Clean Development Competing Market Mechanisms Post-2012

Article excerpt

According to climate scientists, averting the worst consequences of climate change requires that the increase in global temperature should be limited to 2[degrees]C (or 3.6[degrees]F). To achieve that objective, global emissions of green house gases (GHGs)--the main human cause of global warming--must be reduced to 50 percent of 1990 levels by 2050.

The key to successful climate change abatement at those scales lies in leveraging the collective actions of developed and developing countries. Cumulatively, developed countries have been responsible for most human emissions of GHGs. That picture will be quite different in the future as emissions from the developing world take over the top mantle. Given this dynamic, there is a general agreement internationally that developed countries will lead emissions reductions efforts and that developing countries will follow with "nationally appropriate mitigation actions." Turning that agreement into environmentally beneficial action requires close international coordination between the developed and developing countries in allocating the responsibility for the necessary reductions and following up with credible actions. However, the instruments employed so far to promote the necessary collective action have proved to be insufficient, unscalable, and questionable in terms of environmental benefit and economic efficiency.

Currently, the most important and visible link between developed and developing countries' efforts on climate change is the Clean Development Mechanism (COM). The CDM uses market mechanisms--the "carbon markets"--to direct funding from developed countries to those projects in developing countries that lead to reductions in emissions of warming gases. In reality, the experience with the CDM has been mixed at best since its inception in 2006. While the CDM has successfully channeled funding to many worthy projects that reduce emissions of warming gasses, it has also spawned myriad projects with little environmental benefits. Overall, the CDM has led to a significant overpayment by developed countries for largely dubious emissions reductions in developing countries.

As the world enters a new phase of large-scale climate change abatement efforts, it is imperative to motivate and persuade developing countries to take action on climate change, while providing the additional funds where necessary. It is increasingly clear that the CDM is not an effective instrument for engaging developing countries in climate change efforts. When climate change negotiators from around the world get together in Copenhagen in December 2009, one of the key discussion items will be the future of the Clean Development Mechanism (CDM). Those negotiations will aim to design a new framework that retains CDM's positive traits while addressing CDM's fundamental limitations. Research at the Program on Energy and Sustainable Development (PESD) at Stanford University and other institutions across the globe show the need to reduce reliance on CDM-like mechanisms that promote perverse incentives while introducing new mechanisms that incentivize long-term changes in the emissions trajectories of the developing countries. PESD researchers have proposed a new framework, called the Climate Accession Deals (CADs), for incentivizing developing countries to take environmentally beneficial actions. The fundamental idea of the CAD framework is to find synergies between climate change benefits and the core interests--economic growth and energy security--of developing countries. Working to exploit those synergies, CADs include bi- or multi-1 ateral deals between developed and developing countries for effective action to mitigate climate change.

CDM as an Emissions Offset Mechanism

Within the Kyoto Protocol--the existing international climate change regime that is set to take a new shape after 2012--developed countries can emit more than their GHG emissions caps if they can offset those extra emissions by achieving emissions reductions in developing countries. …