Comments Sonia Medina has made

Dear Kyan, thank you for your comments. Although I am afraid to say that your comments are the typical from someone that hasn’t researched enough what the CDM is currently doing. There are many issues that you bring up. I will try to break it up in order to answer your questions. 1. Additionality – could you please reference what researchers you are quoting? I can quote researchers that say completely the contrary. I am arguing what I have seen, which is that I have witnessed a tremendous interest across the world in developing cleaner projects. I strongly believe that developing countries are better prepared today to deal with climate change regulations since they have been exposed to a price of carbon. Moreover, creating the psychology that clean energy sources are worth more than dirty is a qualitative value that should not be underestimated. 2. Hydro power does not contribute to sustainable development – I do not think many people would agree with you that imposing UN top-down definitions on sustainable development is a good idea. Currently, there are 1,572 registered projects with the CDM in 55 countries, as diverse as Nigeria, Fiji, Israel, Laos, China, India, Chile, amongst many others. Could you come up with a definition that would fit them all? Further, there are many other ways by which the CDM and the market impose checks and balances. The CDM allows up to four times for public comments before credits are issued, without including their own internal checks, which are pretty onerous. Further, buyers may also impose their own restrictions. For example, European buyers that wish to purchase CERs from hydro projects larger than 20MW for use in the EU ETS have to submit additional information to the European Commission. They require that a project complies with the World Commission on Dams Guidelines, which is on top of any CDM requirement. 3. CDM encourages perverse incentives (e.g., HFC) – The CDM learned and adapted quickly in this case. What you mention was rectified years ago. HFC projects were the first one to get done and it was quickly realized that they were so profitable that there may be an incentive to invest in HFC plants simply to destroy the gas. The CDM Executive Board realized that and none of those plants were ever allowed to get carbon credits, by including a provision in the methodology that only facilities with an operating history of at least three years between 2000 and 2004 and have been in operation from 2005 can claim offsets. Further, at its Eleventh meeting (October 16-17, 2003) the CDM Executive Board provided guidance that, additionality of a project should be assessed taking into account relevant national and/or sectoral policies, in a way that developing countries do not have a perverse incentive not to implement groundbreaking policies to reduce emissions in their countries.

Dear Jake, thank you for your comment. I am also a fan of sectoral approaches, and I welcome their inclusion in the Waxman-Markey bill, although one needs to be careful. I am also a fan of CDM reform, EcoSecurities has been very vocal in what we see it needs to change in the CDM to make it bigger and better.

With regards to sectoral approaches, though, I think there is major confusion as to what sectoral really mean. I have heard many different definitions by many different people. They are definitely no silver bullet, though. I would welcome a sectoral global approach for sectors that have been completely left out of the CDM for the impossibility of defining ownership of the emission reductions. For example, this is the case for aviation and maritime, which should be tackled by sectoral global agreements. Further, avoided deforestation (REDD) may also be tackled through a sectoral global approach, as suggested by the Waxman-Markey draft.

The CDM may also evolve to incorporate some aspects of sectoral approaches – they do not need to be separate approaches. This is definitely the intention with the approval of the first sectoral benchmarking methodology in the CDM: AM0070 is a sector benchmark methodology approved recently for energy efficient refrigerators. The WBCSD Cement Sustainability Initiative has submitted for approval a sector benchmarking methodology for the cement sector after seven years of research and data gathering. Further, the Brazilian government established a national emission factor for renewable energy projects that facilitated tremendously the calculation of emission reductions by this asset class in Brazil, in a way emulating a national sectoral approach applicable to CDM. Finally, the Programmatic Approach of the CDM strives (although still lacks more definition) to bring the sectoral approach closer to small-scale projects in order to facilitate their inclusion in the CDM. I am hopeful that this approach to methodologies can be further expanded in the CDM world.

My main concern with a national sectoral approach imposed on a top-down approach on governments is that we may lose the clarity that projects developers in the private sector would need to invest in new technology required to fight climate change. Another concern is that in order to draft national baselines, you need an enormous amount of data, that will make the assessment of additionality on a project-by-project basis look like a child puzzle.

Again, I welcome sectoral approaches and we have advocated for simplication of baseline calculations for a long time. But, let’s recognize that sectoral approaches are only helpful in a handful of cases and will similarly take some time to get right.  They are also not immune from the perverse incentive and system gaming accusations. Importantly, a lot of work needs to be done to make sure that private sector have clear incentives on a sectoral scheme. Finally, CDM, sectoral and other approaches are not mutually exclusive, so let’s try to be creative and learn from what we have already built.