UNDP Clean Development Mechanism (CDM) Experience Brian Dawson Climate Change Adviser BDP, New York October 2004

Overview of Presentation  CDM and UNDP’s Climate Change Strategy  Lessons Learnt  State of the CDM market  Future Activities and Issues

UNDP and CDM  UNDP has been active in CDM capacity development in recent years  Field experience in 11 countries  Many lessons learnt  Time to reassess and clearly define UNDPs role

UNDP & CDM: Focus  Foussed on creating an ‘Enabling Environment’  DNA, DOE and public-private partnerships  ‘Learning by Doing’ capacity development  using real projects to build capacity  CDM manual provides guidance

UNDP & CDM: Creating an Enabling Environment Designated National Authorities  Establishing an efficient CDM approval process important  Sustainable Development criteria  Efficient processes and procedures  Legal frameworks

UNDP & CDM: Creating an Enabling Environment Designated Operational Entities and public-private partnerships  Largely ignored to date  Vital role in CDM process  Transaction costs  Engaging industry stakeholders

Overview of UNDP Learning by Doing Capacity Development Countries  South Africa, Morocco, India, Bangladesh, China, Philippines, Brazil, Peru, Nicaragua, Trinidad &Tobago, Malaysia Partners  National Governments, private sector, UNF, World Bank, WBCSD, UNIDO, UNCTAD, DANIDA

Lessons Learnt from CDM Activities  CDM is a complex process  High demand and expectations in many developing countries to undertake CDM activities  Identified need for human and institutional capacity building  Significant knowledge and information gap on the CDM  Good host country enabling environment is critical for CDM  Clear and transparent approval criteria important

State of the CDM Market  Only a few sectors have approved CDM projects  Landfill gas, biomethanation, some renewables  Transport, small scale projects, forestry and energy efficiency projects face major hurdles  Most projects unlikely to be viable in current CDM market  High transaction costs constrain CDM opportunities  Time consuming approvals process

State of the CDM Market  Low carbon prices constrain economic attractiveness  Prices $5-7/tonne but may increase  Market is maturing slowly  Kyoto ratification may improve this  Lack of standardised methodologies and project templates  CDM Board reactive and not proactive

CDM Issues and Barriers Is CDM a real development mechanism?  Not so far  Limited technology transfer  Limited FDI  Minimal impact on MDGs  Is it a cost?

What needs to change?  Revisit CDM rules and guidelines  ODA  Regulatory/sectoral approaches  Standard procedures/methodologies  Reduce transaction costs  Provisions for small scale projects  Development dividend and MDGs

Future Activities on CDM  Phase II of UNF project  Country-level capacity development: South Africa, Brazil, Morocco, India, Philippines  Building linkages between relevant stakeholders  Develop a portfolio of projects  Assess CDM potential of different sectors  Possibly start in 2005

Future Activities on CDM Information Dissemination and Knowledge Transfer  Document Best Practices and what works  Advocacy and analysis  Provide realistic guidance and advice to COs and host countries  Clearly define UNDP’s strategy and role

Conclusions  CDM has not yet lived up to expectations  Offers much potential as a development mechanism  but things need to change  Kyoto ratification a positive impact  UNDP role needs to be cautious but supportive in capacity development