options for pilot activities for an emerging new market mechanism

www.perspectives.cc · [email protected] © 2015 Perspectives GmbH

Options for pilot activities for an emerging NMM

26 May 2015

Carbon Expo, Barcelona

Björn Dransfeld, Axel Michaelowa Perspectives GmbH

www.perspectives.cc · [email protected]

Agenda

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§  Background – Study on NMM options beyond PMR §  Relevance of pilots for the NMM §  Avenues for NMM pilots §  Example 1: Joint Crediting Mechanism §  Example 2: NAMA crediting §  Outlook for NMM pilots


Background – Study on NMM options beyond PMR

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§  Study on "Analysis of Possible New Market Mechanisms Pilot Activities for beyond the PMR" §  Commissioned by the German Ministry of Environment (BMUB) §  Rationale: Explore existing initiatives that could serve as pilots for the NMM §  Scope: Focus on activities outside the PMR §  To be published after Carbon Expo 2015


Relevance of pilots for the NMM

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§  Under the UNFCCC future market based approaches are to be covered by the concepts of the NMM and FVA -  Debates on NMM and FVA have not been progressing in recent years

§  Momentum for market based approaches under the UNFCCC remains, see Article 39 of current negotiation text for the Paris Agreement §  So far a theoretical exercise... § ...Pilot activities can help to illustrate opportunities of markets §  Improving understanding of market mechanisms through learning by doing! Historical precedents: AIJ pilot phase, EU ETS pilot phase §  Major existing playground is the Partnership for Market Readiness (PMR) §  But what potential do we see beyond PMR activities?


Avenues for NMM pilots

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•  Japanese Joint Crediting Mechanism

•  CDM PoA based activities with potential for NMM •  Public-private partnership PoA-NAMA

•  Public sector operated CDM Programme of Activities

•  Voluntary cancellation under the CDM

•  Climate Investment Funds

•  Carbon Taxation

•  NAMAs with potential for inclusion in NMM

•  Results-based finance

•  Other domestic climate policies with mitigation impact


Example 1: JCM

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§  JCM: Japanese answer on perceived shortcomings of the CDM -  Bilateral approach -  Subsidizing Japanese clean technology in developing countries

§  Foreseen as a bridge for markets towards the 2020 treaty, potentially under NMM/FVA §  Assessment of JCM against set of criteria - Political, technical, institutional


Example 1: JCM

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§  Japan is not interested in centralized accounting standards and institutional arrangements (=> FVA) §  Governance and incentive structure may not comply with the NMM as it is envisaged today

§  JCM addresses some NMM Priorities (net mitigation, involvement of host country as precondition for reaching broad segments of the economy)

The JCM is not recommended to be a feasible pilot for the NMM, but a good pilot for an FVA (or framework approach under Paris Agreement)


Example 2: NAMA crediting in Rwanda

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§  Distribution of water filters and cook stoves to poorest strata of society, 600,000 households §  CDM PoA exists and generates CERs but is unlikely to reach target size due to lack of CER demand §  NAMA crediting provides the lifeline for mitigation benefits §  NMM pilot activity would need to §  show how double counting of CERs and mitigation benefits of the NAMA can be avoided

§  test synergies between CDM and NMM MRV


Outlook for NMM pilots

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§  Potential for clustering of various approaches under a UNFCCC mechanism -  Selected Public PoAs in low income countries / LDCs -  NAMAs / domestic policies with robust MRV approach -  RBF approaches with sequenced and transformative character -  Other domestic climate policies and strategies, in particular in countries which are traditionally open to using market-based approaches

§ => Technically, the CDM often could pave the way for NMM pilots (e.g. via public PoAs)

§  But: Any incentive for mitigation induced by an NMM requires robust „mitigation pressure“, i.e. global ambition §  Pilots can test the waters, individual activities could be selected and tested in a “laboratory setting“ (such as the PAF)

www.perspectives.cc · [email protected] © 2015 Perspectives GmbH

Thank you!

Björn Dransfeld, [email protected] Axel Michaelowa, [email protected]

options for pilot activities for an emerging new market mechanism

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