Can CDM monitoring requirements be reduced while maintaining environmental integrity?

clim-policy coverCarsten Warnecke
January 2014

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Monitoring, reporting, and verification (MRV) requirements in the Clean Development Mechanism (CDM) are perceived to be of high quality, but also complex and stringent. Only one-third of the registered projects successfully managed initial verification and already received carbon credits. The time required to achieve first issuance remains high despite considerable improvements in other CDM project cycle steps. This leads to the question of whether MRV provisions in the CDM represent barriers that could be lowered while ensuring the CDM’s integrity. The CDM requirements are compared with the MRV provisions of the EU Emission Trading System (EU ETS). The comparison shows that CDM–MRV provisions are often stricter and less flexible compared to similar provisions in the EU ETS. Due to structural differences between the EU ETS and the CDM, some different MRV approaches are justified and reflect the CDM’s disparate objectives and complexity. It is found that some CDM provisions result in barriers which seem avoidable and do not contribute to the CDM’s environmental integrity. Recommendations are made for CDM-specific improvements and general structural changes to improve cost-efficiency and reduce uncertainty with relevance to policy developments around future market mechanisms.

Policy relevance:
Highly accurate GHG quantification is required for project-based offset mechanisms ensuring that only offsets are generated representing real GHG mitigation. The CDM has developed and applied high standards for MRV requirements to meet this objective. The CDM, however, has also been criticized for its complex rules. These rules create burdens for projects and lead to sectors and project types that have not benefited from the carbon markets. Given the current state of the CDM with its insecure future and attempts to maintain, further amend, and transfer the CDM’s rules to new mechanisms, it is appropriate to assess the suitability of these specific rules. Particularly in respect to the review of the CDM Modalities and Procedures and the discussions around modalities for a New Market-based Mechanism (NMM), this assessment provides the required insights to learn from past experiences and successfully develop future mechanisms.