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:
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.
Industry must be provided reasonable flexibility to develop and implement CDM projects that result in real emission reductions.
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.
The CDM process must be sufficiently simple to ensure active participation by industry. A simple process will ensure that transaction costs are minimized.
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.
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.
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 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.
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.
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.
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.
The International Climate Change Partnership (ICCP), organized in 1991, is a global coalition of companies and trade associations pom diverse industries committed to constructive and responsible participation in the international policy process concerning global climate change. The ICCP recognizes that the continued growth in emissions of greenhouse gases is an important concern for all nations and that efforts are underway internationally and in national governments to develop policies that address this concern. ICCP also understands the importance of working within the process to achieve important environmental objectives while fostering continued economic development and improvement in living conditions for all.
October, 1998
For more information, please contact: ICCP, 2111 Wilson Blvd., Ste. 850; Arlington, VA 22201; Telephone: 703-841-0626; FAX: 703-243-2874; e-mail: iccp@alcalde-fay.com