From Clean Development Mechanism to Sectoral Crediting Approaches – Way Forward or Wrong Turn?

The Clean Development Mechanism (CDM) has been a mixed success. On the one hand, it has mobilised thousands of projects and billions in investment in a very short timeframe. On the other hand, it has faced serious criticism as to the strength of the incentive it actually provides, its environmental integrity and its contribution to sustainable development. Sectoral approaches have been discussed as one means to overcome the weaknesses of the current CDM. This paper has a twofold aim. First, it analyses the current status as regards the CDM and in particular its shortcomings in promoting low-GHG sustainable development. Second, it tries to assess how far sectoral approaches could address the concerns that have been raised. The paper begins with a brief overview of the strengths and weaknesses of the CDM, focusing on weaknesses to serve as a basis for the discussion in how far sectoral approaches would be able to address them. Secondly, discussions about the further development of emissions trading after 2012 should be guided by an understanding of how emission reduction options are structured and who are the actors that would need to make investment decisions. The paper therefore briefly discusses mitigation options, though does not claim to be comprehensive. This discussion is followed by an outline of the different definitions that have been put forward for sectoral approaches and a discussion of how far sectoral approaches might help to address the perceived shortcomings of the current CDM. Finally, the article discusses how sectoral approaches may fit in with the overall post-2012 climate regime.

JIKO policy papers are written and published by the Wuppertal Institute on behalf of the German Environment Ministry (BMU). The positions expressed in this policy paper are strictly those of the authors and represent neither the opinion of the Wuppertal Institute nor of the BMU.