Realizing the Development Dividend:

Making the CDM Work for Developing Countries

Aaron Cosbey,Climate Change & Energy, IISD

To assist Parties not included in Annex I in achieving sustainable development and in

contributing to the ultimate objective of the Convention.

To assist Parties included in Annex I in achieving compliance with their quantified

emission limitation and reduction commitments.

Objectives of the CDM

• All the non-climate-related SD benefits (co-benefits) that might result from a CDM project, whether from investment, tech transfer, new production processes, or new products:– Environmental benefits (e.g., better air quality)– Economic benefits (e.g., increased employment)– Social benefits (e.g., better quality of life via energy)

• To be sustainable development, need some element of all three types of benefits.

• The Development Dividend Project aims to help the CDM better deliver these benefits, in large quantities.

What is the Development Dividend?

• Phase I: analytical report• Survey of 50 stakeholders, lit review

– NGOs, donors, private sector, governments– Developing and developed countries

• Supported by: Norway, Denmark, Canada, IDRC, UNDP.

The Development Dividend Project

1. Is the CDM shaping up to deliver sustainable development benefits?

2. Is the CDM shaping up to deliver enough quality projects/investment?

3. Is the CDM delivering investment equitably, reaching least developed countries?

The Analysis: Three Questions

1. The Quality Question

2. The Quantity Question

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Annual GHG CreditsSource: Ellis & Levina

Number of ProjectsSource: Ellis & Levina

2. The Quantity Question• 411 projects registered and in progress;

122 MtCO2e /yr.• Estimated demand: 217 – 640 MtCO2e/yr

in 2010.• To meet that demand, with current

average project size, need 849 – 2,504 projects in 1st commitment period.

• Can’t assume volume will continue, or that all CERs will materialize.

3. The Equity Question

China17%

India26%

Korea9%

Africa7%

Middle East0%

Europe0%

Brazil13%

Other Latin America

16%

Other Asia11%

Geographic Split of Expected CERsSource: Ellis & Levina

CERs per capita(expected, as of Nov. 16, 2005)

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1. EB/Project Cycle2. Changing Rules3. Engaging ODA, FIs4. CDM Post-20125. Defining SD in CDM

Policy Options (from Phase I)

• Task Force of 30 Experts from various stakeholder groups - to consider theme, draft papers, help influence policy process, advance debate.

• Development of three analytical papers – to delve further into three issues identified in Phase I.

• Supported by Norway, Denmark, Canada, UNDP, IDRC.

The Development Dividend Project - Phase II

• 3 papers completed and released prior to COP/MOP-2, where rule changes for CDM will be considered:– 1. Defining the development dividend– 2. Changing the rules of the CDM– 3. Financing the development dividend

Phase II Research Papers

• Will more clearly articulate what is meant by “Development Dividend”, but not as a condition.

• Propose a framework for assessing its strength in specific CDM projects.

1. Defining the Development Dividend

• Will explore in depth some of the CDM rule changes suggested in the Phase I report, e.g.:– sectoral and policy-based CDM– special treatment for small-scale projects– product-based crediting– expanded role for sinks.

2. Changing the Rules for a Development Dividend

• Will explore the ways in which we might increase the available financing for CDM projects that yield Development Dividend.

• Will assess the state of the problem, survey existing approaches and evaluate recommendations.

• Role of ECAs, IFIs, Trust Funds, etc.

3. Financing the Development Dividend

The Development Dividend

More information available at: www.iisd.org/climate/global/dividend.asp

Contact: Aaron Cosbeyacosbey@iisd.ca