The role of CDM and offsets as part of future carbon markets

With the expiry of the Kyoto commitment period at the end of 2012, demand for Certified Emissions Reductions produced by the Clean Development Mechanism (CDM) is unclear. In addition to this, the CDM has been the subject of debate regarding the increased number of projects, bureaucracy, transaction costs, and the concentration of projects in a few, primarily emerging, countries.

Some jurisdictions are exploring alternative options for offset and crediting mechanisms that would lead to a fractionalisation of the international carbon market and complicate future cooperation between emissions trading systems. A reform of the CDM offers the advantage of an established structure to measure and verify emissions in developing countries, finance development mitigation measures, and provides an adaptable global alternative offset and crediting framework in the international carbon market.

Over the project duration 2011-2013, adelphi, together with the Wuppertal Institute, supports the German Federal Ministry for the Environment (BMU) acting through the Federal Environment Agency (UBA) in seeking dialogue and exchange on offset policy and CDM reform between the German government and administrators of other jursdictions. The aim of the project is to compare and contrast the offset priorities and approaches of four possible future sources of offset demand outside of the EU – Japan, California, the Republic of Korea, and Australia – and thereby contribute to the CDM reform dialogue process.