Presentation by Perspectives' Axel Michaelowa and Björn Dransfeld at Carbon Expo 2015 in Barcelona: What is the relevance of current initiatives in international climate policy and how could further activities inform the negotiations on a New Market Mechanism under the United Nations Framework Convention on Climate Change?

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Options for pilot activities for an
emerging NMM
26 May 2015
Carbon Expo, Barcelona
Björn Dransfeld, Axel Michaelowa
Perspectives GmbH

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Agenda
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§ Background – Study on NMM options beyond PMR
§ Relevance of pilots for the NMM
§ Avenues for NMM pilots
§ Example 1: Joint Crediting Mechanism
§ Example 2: NAMA crediting
§ Outlook for NMM pilots

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Background – Study on NMM options beyond PMR
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§ Study on "Analysis of Possible New Market
Mechanisms Pilot Activities for beyond the PMR"
§ Commissioned by the German Ministry of Environment
(BMUB)
§ Rationale: Explore existing initiatives that could serve
as pilots for the NMM
§ Scope: Focus on activities outside the PMR
§ To be published after Carbon Expo 2015

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Relevance of pilots for the NMM
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§ Under the UNFCCC future market based approaches are to be covered by
the concepts of the NMM and FVA
- Debates on NMM and FVA have not been progressing in recent years
§ Momentum for market based approaches under the UNFCCC remains, see
Article 39 of current negotiation text for the Paris Agreement
§ So far a theoretical exercise...
§ ...Pilot activities can help to illustrate opportunities of markets
§ Improving understanding of market mechanisms through learning by
doing! Historical precedents: AIJ pilot phase, EU ETS pilot phase
§ Major existing playground is the Partnership for Market Readiness (PMR)
§ But what potential do we see beyond PMR activities?

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Avenues for NMM pilots
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• Japanese Joint Crediting Mechanism
• CDM PoA based activities with potential for NMM
• Public-private partnership PoA-NAMA
• Public sector operated CDM Programme of Activities
• Voluntary cancellation under the CDM
• Climate Investment Funds
• Carbon Taxation
• NAMAs with potential for inclusion in NMM
• Results-based finance
• Other domestic climate policies with mitigation impact

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Example 1: JCM
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§ JCM: Japanese answer on perceived shortcomings of
the CDM
- Bilateral approach
- Subsidizing Japanese clean technology in developing
countries
§ Foreseen as a bridge for markets towards the 2020
treaty, potentially under NMM/FVA
§ Assessment of JCM against set of criteria
- Political, technical, institutional

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Example 1: JCM
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§ Japan is not interested in
centralized accounting
standards and institutional
arrangements (=> FVA)
§ Governance and incentive
structure may not comply with
the NMM as it is envisaged
today
§ JCM addresses some NMM
Priorities (net mitigation,
involvement of host country
as precondition for reaching
broad segments of the
economy)
The JCM is not recommended to be a feasible pilot for the
NMM, but a good pilot for an FVA (or framework approach
under Paris Agreement)

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Example 2: NAMA crediting in Rwanda
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§ Distribution of water filters and cook stoves to
poorest strata of society, 600,000 households
§ CDM PoA exists and generates CERs but is unlikely
to reach target size due to lack of CER demand
§ NAMA crediting provides the lifeline for mitigation
benefits
§ NMM pilot activity would need to
§ show how double counting of CERs and mitigation benefits of
the NAMA can be avoided
§ test synergies between CDM and NMM MRV

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Outlook for NMM pilots
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§ Potential for clustering of various approaches under a UNFCCC mechanism
- Selected Public PoAs in low income countries / LDCs
- NAMAs / domestic policies with robust MRV approach
- RBF approaches with sequenced and transformative character
- Other domestic climate policies and strategies, in particular in countries which are
traditionally open to using market-based approaches
§ => Technically, the CDM often could pave the way for NMM pilots (e.g. via
public PoAs)
§ But: Any incentive for mitigation induced by an NMM requires robust
„mitigation pressure“, i.e. global ambition
§ Pilots can test the waters, individual activities could be selected and tested
in a “laboratory setting“ (such as the PAF)

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Thank you!
Björn Dransfeld, dransfeld@perspectives.cc
Axel Michaelowa, michaelowa@perspectives.cc