negotiation watcher > carbon market and flexible mechanisms
The carbon market is a key player in attracting both private and public investments having the potential to move huge financial flows to developing countries for mitigation and adaptation. Despite the criticism, project-based mechanisms (Clean Development Mechanism and Joint Implementation) represent a key component of the Kyoto Protocol. So far CDM has played a crucial role in spreading technology and financial transfer in developing countries. However, the need to reform flexibility mechanisms in order to improve their effectiveness and equity strongly emerged in recent years. Furthermore, some parties expressed concern over the impact on projects (and credits) of a possible gap period created between the Kyoto Protocol’s first and second commitment periods.
The final texts in Cancún implicitly confirm that market mechanisms remain available for Annex I Parties to meet their emission objectives even if a second commitment period will not be agreed by 2012. In addition, Carbon Capture and Storage (CCS) has been included among project activities by which developed countries can offset their emissions through the CDM and the introduction of new mechanisms will be considered during the next Conference (COP 17) in Durban.
Another important progress in the Cancún Agreements concerns the definition of the REDD-plus mechanism (Reducing Emission from Deforestation and forest Degradation). This part of the agreements encourages all countries to reduce the human pressures on forests and recognizes that a phased approach will likely be necessary to developing this mechanism. These phases include the establishment of a national plan, a reference level, a robust national system for monitoring and reporting and a system for providing information on safeguards. However the text does not define whether and how a market-based approach will be used to finance REDD-plus activities in developing countries.
Finally the Cancún Agreements also emphasize the role of Land use, land use change and forestry (LULUCF).
