International Environmental Law and Distributive Justice

The Equitable Distribution of CDM Projects under the Kyoto Protocol

Tomilola Akanle Eni-Ibukun

• Verlag: Routledge
• Jahr: 2013
• ISBN:
  9781136020889
• Auflage: 1
• Thema: Law
• Thema: Environmental Law

The Clean Development Mechanism (CDM) is widely regarded as one of the Kyoto Protocol's best creations and as an essential part of the international climate change regime. The CDM has been constantly evolving to ensure that it fulfils its objectives of mitigating climate change and contributing to sustainable development in developing countries. The over 6, 000 registered projects under the CDM are estimated to have generated almost US$200 billion of investment in developing countries and are expected to achieve GHG emission reductions of about 6.8 billion tonnes. Nevertheless, the CDM is not perfect, and one of its main problems is the inequitable geographic distribution of projects among developing countries. Understandably, this is a problem that countries are very keen to address, and since 2001, even before the first project was registered, countries have been highlighting the need to ensure that projects are equitably distributed among participating countries.

This book looks at distributive justice under the CDM regime and focuses on the issue of equity in the geographic distribution of CDM projects among developing countries. The book investigates relevant aspects of international law to identify the legal characteristics of equitable distribution or distributive justice, in order to establish what equitable distribution in the CDM should look like. Based on these investigations, Tomilola Akanle Eni-Ibukun breaks new ground in defining equitable distribution under the CDM and exploring how key obstructions to the equitable distribution of projects may be overcome.

The book will be of particular interest to academics and policymakers of climate change and the CDM within international law.

Part I

Introduction

1 Introduction

The Clean Development Mechanism (CDM) is widely regarded as one of the Kyoto Protocol’s biggest achievements and a key part of its architecture. It was established to achieve cost-effective emission reductions and to contribute to sustainable development in developing countries. In its almost 10 years of operation, it has reduced millions of tonnes of carbon dioxide, raised billions of dollars of investment in developing countries and saved developed countries billions of dollars in compliance costs.

Nevertheless, the mechanism has several shortcomings. It has been criticised for allowing projects that will not sufficiently contribute to developing countries’ sustainable development. Another key shortcoming is the poor distribution of CDM projects and their benefits among developing countries.

The first CDM project was registered in 2004, and there are now well over 6,500 registered projects, expected to reduce over 848 million tonnes of carbon dioxide annually (CDM Pipeline (http://cdmpipeline.org/), 1 March 2013). The total investment in registered projects and those undergoing registration was estimated to be about US$215.4 billion as of June 2012 (UNFCCC 2012: 42–4). There are 129 countries eligible to participate in the CDM, and 84 of these have registered projects. However, of this number, just 2 countries – China and India – host over 70 per cent of all registered projects (CDM Pipeline, 1 March 2013). These 2 countries also accounted for 65 per cent of the total investment in CDM projects as of June 2012 (UNFCCC 2012: 44). Understandably, therefore, this is a serious problem that countries have been keen to resolve.

This book focuses on this issue of equity in the geographic distribution of CDM projects among developing countries. Its aim is to identify ways to promote a more equitable distribution of CDM projects among developing countries, in order to ensure that as many countries as possible are able to enjoy the benefits of the CDM.

Specifically, this book has three main objectives. It analyses how distributive justice is achieved in international law and, using this as a basis, defines equitable distribution of CDM projects and outlines the ideal distribution of projects. It then identifies the main reasons why the distribution of CDM projects remains inequitable and all the efforts to promote equitable distribution have not achieved their goal. And, finally, it suggests measures that can be taken to ensure a more equitable distribution of CDM projects.

This book shows that, although there are many factors that contribute to the inequitable geographical distribution of CDM projects, there are two principal reasons for the continuing inequity. First, there is a dominance of unilateral CDM projects in the CDM market, which has effectively shut out those countries without the financial and technical capacity to unilaterally develop and implement projects. Second, as a result of the market-based nature of the CDM, in which cost-effectiveness, risk minimisation and profit maximisation are key, and the sustainable development contributions of CDM projects are not monetised, investors have gravitated towards the countries with the potential for low-cost, low-risk, high-profit projects. Indeed, these countries have dominated the CDM market, and other countries have been left far behind.

This book also reveals that these two principal barriers have resulted in a situation where the countries that are most in need of the benefits of the CDM, because of their low development levels, have been largely excluded from the mechanism and so are benefiting the least from it. It shows that this is because most of these countries lack the technical capacity and access to finance to undertake unilateral projects. Most of them also have small economies and lack the high emission levels and institutional capacity (and the attendant potential for low-risk, high-profit projects) that CDM investors prefer. Although, generally, these countries have great potential for projects that deliver high sustainable development benefits, this is not a particular advantage under the CDM, as the sustainable development element of the CDM, unlike its greenhouse gas (GHG) emission reduction element, has no monetary value put on it.

The book recommends that, to address these barriers, there is a need to establish a project development and implementation fund and also to regulate the CDM market by, for instance, limiting the percentage of permitted unilateral projects and mandating consideration of countries’ sustainable development potential. It argues that such regulations will not substantially affect investors’ interest in the CDM market, considering the size of the CDM market and the fact that the use of the CDM has saved developed countries and their entities an estimated US$3.6 billion in compliance costs.

This book begins by defining the term ‘equitable distribution of CDM projects’, which is a commonly used, yet undefined, reference to distributive justice in CDM parlance. This is a significant contribution because, although countries have, for years, been calling for an equitable distribution of projects and making efforts in this regard, this term has never actually been defined. Without such a definition, the goal being strived for remains unclear. As noted by the Secretariat of the United Nations Framework Convention on Climate Change (UNFCCC or Convention):

Assessing the distribution of CDM projects requires a benchmark – an equitable regional distribution – against which the actual distribution of CDM projects can be compared. Neither the CMP [Conference of the Parties serving as the meeting of the parties to the Kyoto Protocol] nor researchers have defined ‘equitable regional distribution’.

(UNFCCC 2012:61)

This book addresses this gap.

Also, as shown in Chapter 9, a lot of effort has gone into promoting an equitable distribution of projects. However, these measures have not made much difference in the distribution of projects. This book establishes the reason for this, showing that none of the measures addresses the fundamental barriers to equitable distribution, and that, until these fundamental barriers are addressed, the distribution of projects will remain inequitable.

It is important to note at this stage that the second commitment period under the Kyoto Protocol has begun and runs to 2020. This means that the CDM is now in its second operational phase. The question of whether or not there will be a third phase (that is, whether there will be a third Kyoto Protocol commitment period) is still uncertain, but unlikely. This is because countries are currently working to establish a new global agreement, which would essentially replace the Kyoto Protocol. This agreement is expected to be adopted in 2015 and come into force in 2020. When this happens, the CDM in its current form will likely ‘lapse’, as the Kyoto Protocol would at this point come to a natural end, although there is some expectation that, together with some of the Kyoto Protocol institutions, the CDM will continue in some form under this new agreement.

The issues addressed in this book are pertinent to the CDM in this second phase and will remain pertinent to any future market mechanism that is established under the new agreement, including the new market mechanism that was ‘defined’ by the seventeenth session of the Conference of the Parties (COP17) in 2011 (discussed further in Chapter 10). It is important that, in designing a new market mechanism or mechanisms, countries learn from past and current mistakes, so as to ensure that the regime is properly placed to achieve an equitable distribution of projects and their benefits.

Another important point to note is on terminology. This book focuses on distributive justice under the CDM, and, under the CDM regime, the specific term used to refer to this is ‘equitable distribution’. Consequently, this book uses ‘equitable distribution’ when referring to the CDM, but ‘distributive justice’ when speaking more generally.

This book is divided into three main parts. Part I contains an introduction to the CDM, explaining what it is, as well as its objectives, operation and structure. It also contains an explanation of the need to achieve an equitable distribution of CDM projects.

The focus of Part II is on defining equitable distribution of CDM projects. It starts by analysing the framework of equity under the international climate change regime, as well as the approach to distributive justice in international law generally. It shows that generally, in international law, distributive justice is achieved through a process that takes full account of specific factors and that, by ensuring a balance among these factors, achieves an equitable or just outcome. This reflects the approach to equity taken in the climate change regime, which generally requires consideration of countries’ needs, responsibility and capability, and supports this by giving certain countries preferential treatment. It concludes that, under the CDM, equitable distribution requires due consideration of countries’ emission reduction potential and need (sustainable development potential), supported by preferential treatment for the countries with the greatest need. The distribution that results from full consideration of these two elements can then be regarded as equitable. Using this definition, it finds that the current distribution of projects is inequitable.

Part III undertakes a critique of the legal regime governing the CDM to identify the reasons for the inequitable distribution of projects. By analysing the challenges faced by countries in accessing the CDM, it determines that the two main barriers to equitable geographic distribution of projects are the dominance of unilateral CDM projects in the CDM market and the market nature of the CDM. Recommending regulations of the CDM market to address these barriers, this book contends that, despite reluctance to regulate the CDM because of its market nature, such regulations are necessary if the CDM is to achieve equity in its distribution of projects among developing countries.

2 The Clean Development Mechanism

The clean development mechanism (CDM) is a unique mechanism for global collaboration that seeks to mitigate climate change while delivering sustainable development to the developing countries that host CDM projects.¹

The CDM is a double-headed tool designed to both achieve cost-effective GHG emission reductions and deliver sustainable development. Accomplishing both objectives is vital to the success of the CDM, and understanding both is key to tackling the challenge of delivering equitable distribution of projects. This chapter begins with a brief overview of the CDM as a tool for mitigating climate change and promoting sustainable development. It explains some of the key benefits of the mechanism and outlines its structure and participation requirements.

The objectives and benefits of the CDM also explain why countries should strive to achieve an equitable geographic distribution of projects. Because both objectives of the CDM are equally important, the need to achieve an equitable distribution of projects must not be overlooked. This chapter explores the motivation for the establishment of the CDM and the expressed expectations of its proponents, highlighting that one of the main reasons for developing countries’ acceptance of the CDM was the reassurance that it would contribute to their sustainable development. The concentration of most CDM projects (and the benefits they provide) in just a few developing countries is therefore very much a concern for most developing countries, and justifiably so.

2.1 Overview of the CDM

The CDM is a market-based instrument of the Kyoto Protocol under which project activities that result in reduced GHG emissions can be implemented in developing countries. Such activities vary considerably – they range from small projects that replace incandescent light bulbs with compact fluorescent bulbs, to much larger projects that involve the construction of wind farms to supply renewable energy and replace fossil fuel-generated energy.

The CDM was conceived as a way of increasing direct investment into developing countries, where the cost of mitigation is much lower than in developed countries. Developing countries would benefit from this investment and the contribution it would make to their sustainable development, and developed countries could use the emission reduction credits (Certified Emission Reductions, or CERs) generated by these projects to contribute to meeting their Kyoto Protocol emission reduction commitments (Kyoto Protocol, Article 12.3).

The CDM is one of the three ‘flexibility’ mechanisms established under the Kyoto Protocol to give developed countries some flexibility in how they meet their Kyoto Protocol commitments and also to reduce the cost of meeting these commitments. To be registered as a CDM project, a project must show that it will result in emission reductions that are additional to any that would occur in the absence of the project (Kyoto Protocol, Article 12.5(c)). This is known as the additionality test.

To prove additionality, it is necessary to establish a baseline, which is the scenario that represents the level of GHG emissions that would ordinarily be produced in the absence of the proposed project activity. Reductions below this baseline as a result of the CDM project are the additional reductions, and it is for these that CERs are issued. One CER is equal to 1 tonne of carbon dioxide equivalent (CO₂e) reduced (such as through an energy efficiency project) or removed from the atmosphere (such as through an afforestation project) (Decision 3/CMP.1, Annex, paragraph 1).

The two main objectives of the CDM are to contribute to sustainable development in developing countries and to contribute to climate change mitigation through the GHG emission reductions achieved by projects. Generally, in relation to developing countries, the CDM aims to assist developing countries to achieve sustainable development and to contribute to the ultimate objective of the Convention. In relation to developed countries, the CDM aims to provide them with cost-effective opportunities to comply with their emission reduction commitments (Kyoto Protocol, Article 12.2).

CDM project activities implemented in developing countries represent funding and investment that are additional to the official development assistance received by these countries and are also additional to the financial obligations of developed countries contained in the Convention (Decision 17/CP.7, Preamble, paragraph 7; Decision 3/CMP.1, Appendix B, paragraph 2(f)). This investment should assist developing countries in achieving their sustainable development objectives, including their economic and environmental goals, by, for example, providing clean technology, access to energy, more jobs, capacity building, and cleaner air and water, and ensuring more sustainable use of land and other natural resources. The benefit to developed countries is the lower marginal abatement cost of reducing emissions in developing countries compared with reducing them in developed countries. For instance, it is estimated that the CDM has saved developed countries and their entities about US$3.6 billion in compliance costs (UNFCCC 2012: 58–9).

The Kyoto Protocol is now in its second commitment period, and the CDM is therefore in its second operational phase, running from 1 January 2013 to 31 December 2020 (Decision 1/CMP.8, paragraph 4). Countries are currently negotiating a new global agreement, which is expected to come into force and be implemented from 2020 (Decision 2/CP.18, paragraph 4). This is discussed in a bit more detail in Chapter 10.

2.1.1 CDM participation requirements

The legal regime governing the CDM lays down certain participation requirements, and only those countries that fulfil these requirements can participate in the CDM. There are three basic requirements that must be fulfilled by both developed and developing countries to make them eligible to participate in the CDM. These requirements are: ratification of the Kyoto Protocol, establishment of a designated national authority (DNA) and (confirmation of) voluntary participation:

(a) Ratification of the Kyoto Protocol: participation in the CDM is only open to those countries that have ratified the Protocol, and therefore countries may only participate in the CDM once they become parties to the Protocol (Decision 3/CMP.1, Annex, paragraphs 30 and 31(a)). Both private entities, such as companies, and public entities, such as governments or government agencies, are allowed to participate in the CDM (Kyoto Protocol, Article 12.9). However, before private entities can participate in the CDM, they must be authorised to do so by eligible countries (Decision 3/CMP.1,...

Inhaltsverzeichnis

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Foreword
• Preface
• Acknowledgements
• PART I Introduction
• PART II Defining equitable distribution
• PART III Achieving equitable distribution
• Appendix A: List of eligible developing countries
• Appendix B: Eligible developing countries and their GHG emissions
• Appendix C: Eligible developing countries and their HDI
• Bibliography
• Table of international treaties and other instruments
• Table of cases
• Table of UNFCCC documents and decisions
• Index