Compliance Market Forum Question 1
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June 9, 2008, 10:19 am
Filed under: 2. CARBONplus - COMPLIANCE MARKETS Forum
Filed under: 2. CARBONplus - COMPLIANCE MARKETS Forum
One of the flaws with the regulated markets is that they fail to significantly contribute to sustainable development of poor populations in developing countries. Do you think the CARBONplus accounting system can be used for evaluating sustainability issues related to CDM projects?
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Some experts definitely feel that development benefits have not featured prominently in the types of projects that have passed through the CDM thus far. This is in large part due to the price of carbon credits on the world market – at the current price, only certain types of reduction initiatives are financially feasible. Building large “development dividends” can in some cases increase the cost of carbon credits from these projects, making them less competitive and therefore less likely to receive financing/buyers. This is the difficult situation the international market is now in.
In response to this, some host countries have implemented their own strict sustainable development guidelines, and one country (China) has indicated they would take a levy from projects that did not contribute to sustainable development. Some buying countries have indicated that they would not purchase certain types of credits (the EU in particular) although this has not been widespread.
So in a nutshell, while it can be valuable to develop an accounting system for SD benefits beyond carbon reduction, in reality its not likely that the market would absorb higher prices for these non-regulated benefits, at least during this commitment period.
Comment by Anonymous Commentator 1 June 12, 2008 @ 3:52 pmI think it can be used – as can other methods. One of the topics being discussed for the future of the CDM is whether it is possible to go beyond the current position whereby host countries determine what is acceptable as far as the contribution to sustainable development goes.
In an international negotiations context it is difficult to go beyond the current situation since the host countries claim the sovereign right to decide this for themselves rather than have some do-gooder Europeans setting out some different framework for what is best for their countries’ development – even if they are right.
Nevertheless, now is a good time to be promoting some easily comprehendable way of making a judgement about what is an acceptable contribution to SD by which to judge projects.
In the end – the CDM is a market mechanism – designed to obtain carbon reductions cheaply – the other aspects are add-ons. But just as much as host countries have sovereignty, so do purchasers – even if it is not acceptable to impose outside standards on host countries, purchaser countries and companies and individuals can set their own requirements – and make the market adapt to their demand. So promotion of standards on the buyer side might be the most productive in the end – and contribute to demand and higher price for the sorts of projects we are talking about here.
I think it is interesting that EU countries talk a lot about SD standards – but if you look at who the largest investers in these non-SD projects are it is just these EU countries – so even they are out for the cheapest CERs they can get despite all this talk and criticism of host countries for allowing them.
Comment by Anthony Pearce June 17, 2008 @ 8:01 am