Discussion Paper: CDM Supply Potential up to 2020

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Authored by NewClimate Institute, Lambert Schneider and Stephanie La Hoz Theuer, this publication forms part of a broader project, commissioned by the German Emissions Trading Authority (DEHSt) at the German Environment Agency (Umweltbundesamt, UBA), with the primary objective to analyse the current situation and development of the international carbon markets.


Abstract

This discussion paper estimates the potential supply of certified emission reductions (CERs) from projects registered under the Clean Development Mechanism (CDM) for the period 2013 to 2020.

The supply potential estimation considers the most recent information on the status of CDM projects and their ability to issue CERs, if sufficient demand were recreated on short-term. The actual current demand for CERs is still low but could increase if CERs were used beyond the Kyoto Protocol (for example under CORSIA). When considering options for using CERs from registered projects, a key question for policy makers is whether the projects are likely to continue greenhouse gas (GHG) abatement even in the absence of CDM revenues or whether they are vulnerable of discontinuing abatement.

Drawing upon recent research, this paper differentiates the CER supply potential between projects that are vulnerable of discontinuing GHG abatement and those that are not. The CER supply potential is estimated based on a bottom-up model that reflects recent research on the status and operation of CDM project activities as well as regulatory requirements of the CDM which could limit the ability to issue CERs, with the view to providing a realistic estimate of the CER supply potential. The CER supply potential for the period 2013 to 2020 is estimated to amount to about 4.7 billion CERs. 82 % of the CER supply potential comes from projects that are not deemed vulnerable, whereas only 4 % comes from projects that are deemed vulnerable but can still issue CERs. For 13 % of the CER supply potential the vulnerability is variable; for 2 % it was not assessed.

Although this potential is significant, it is considerably lower than the ex-ante emission reduction estimates in project design documents of 7.7 G t CO2 e for the same period. Hydro and wind power projects contribute most to this potential, making up 61 % of the overall CER supply potential. The relative contribution of industrial gas projects is with 8 % much lower than in the first commitment period where they accounted for 52 % of the CERs issued. Programmes of activities (PoAs) only account for 3 % of the potential.

Contacts for further information:  Carsten Warnecke / Thomas Day