The flexibility mechanisms included in the Kyoto Protocol are essential for business and
industry to make progress in reducing greenhouse gas concentrations in the atmosphere.
Like emissions trading and joint implementation, the Clean Development Mechanism
(CDM) not only presents an opportunity to make real greenhouse gas emission
reductions, but also provides a mechanism for technology transfer to promote sustainable
development in developing countries. In order for industry to make CDM investments to
reduce greenhouse gas emissions starting in the year 2000, however, development of the
technical guidelines and institutional mechanisms is essential. The International Climate
Change Partnership (ICCP), a coalition of companies and industries around the world
committed to responsible participation in the climate change policy process, supports the
following principles with regard to the development and implementation of the CDM:
Credible
Consistent with our principle that any international effort to reduce greenhouse gas
emissions must include sufficient technically rigorous mechanisms to ensure credibility,
the CDM must result in emission reductions that are measurable and verifiable.
Flexible
Industry must be provided reasonable flexibility to develop and implement CDM projects
that result in real emission reductions.
Unconstrained
There should be no limitation or upper bound on the use of the CDM. Industry should be
able to generate any amount of credits through the mechanism, regardless of any future
individual company compliance target or requirement, as long as the credits are
verifiable.
Simple
The CDM process must be sufficiently simple to ensure active participation by industry.
A simple process will ensure that transaction costs are minimized.
Cost Effective
Industry believes that "proceeds" as defined in Article 12 of the Kyoto Protocol is a
portion of the emission credits created by a CDM project. A share of the emission credits
generated by a CDM project will be surrendered to fund the management of the CDM
and to finance adaptation/mitigation projects. The surrender of a high proportion of the
credits will act as a deterrent to industry's participation in the CDM process.
Inclusive Scope
Industry should be allowed and encouraged to move forward with any project that creates
real emission reductions. The CDM should include all sources, sinks and technologies.
Project Baselines and Additionality
Industry should be allowed to present technical information to the appropriate certifying
organizations that demonstrates the emission reductions produced by the project. Changes
made to existing operations as well as new facilities or infrastructure improvements
which emit less greenhouse gases when compared to an appropriate, rational baseline
should be eligible. Baselines should consider availability of fuels, infrastructure and
services to support advanced technologies, regional economic and environmental
requirements and other appropriate factors.
Early Experience
Early experience with the CDM will generate practical experience with the exchange of
emission credits on an international basis and should create confidence in the role of flexibility
mechanisms in reducing emissions in a cost-effective manner. For this reason, every effort should
be made to ensure that the CDM program is in place as soon as practicable. Delay in program
implementation will cause delay in the initiation of projects. To
facilitate this learning process, COP 4 should instruct the appropriate body to develop a
workplan for addressing the technical and program implementation issues. It may be necessary or
desirable to allow certain types of CDM projects to occur earlier than others as
the availability of technical information permits the appropriate certifying organization to
ensure credibility.
Liability and Risk Must be Known
Industry must know who is liable, either the buyer or seller, for CDM projects which do
not perform as expected. The control of risk is an essential component of any business
decision and must be adequately addressed by the CDM. Each CDM project will have a
differing degree of risk based on numerous complex factors, therefore, liability must be
negotiated between buyers and sellers. Exclusive reliance on buyer liability will have a
chilling effect on project implementation and should be rejected.
Banking
Industry should be allowed to bank credits generated in the period of 2000 to 2008 for use
during the first or any subsequent commitment period.
Ensuring Success
Investment by business and industry in developing countries is the most effective mechanism for
technology transfer to those countries. The CDM will only be successful if the
private sector participates. As such, industry must have an active role in the development
of CDM's programmatic requirements. This will help ensure the viability of the implementing programs.
The ICCP is prepared to work with the appropriate parties to ensure that a viable and effective CDM is developed.
