Programa de Cambio y Variabilidad Climáticos

The Clean Development Mechanism

under a Mexican perspective

Carlos Gay y Manuel Estrada

Centro de Ciencias de la Atmósfera UNAM

México sees many potential benefits in the Clean Development Mechanism (CDM,
Art. 12 of the Kyoto Protocol) if properly designed. There are some fundamental
issues that need to be carefully addressed in order to achieve the two main
objectives of the CDM: helping developed countries to fulfil their reduction
commitments under the Kyoto Protocol and promoting the sustainable development
of non Annex I countries.

Addressing the first one implies building the technical capacity necessary to
produce certifiable emissions reductions in developing countries. In the case of
Mexico, some institutional arrangements and capacity building have taken place in
the last few years, mainly to produce the Country Study and to establish a national
position on climate change negotiations. Nevertheless, both the governmental and
the private sector currently lack of many of the institutions, human and material
infrastructure required to participate in the CDM.

The Mechanism itself has still a lot of key issues to be defined. Decisions on the
inclusion of sinks, the role of the executive board and of operational entities,
supplementarity, compliance, etc. have not been defined and can greatly affect the
final design and the future of the CDM.

A Mexican CDM proposal

The definition of these pending issues according to Mexico s circumstances and

conveniences and would give place to a CDM functioning as shown in Diagram 1
and will be commented below:
In order to be functional and effective, the CDM should be simple and interfere as
little as possible with the creation of projects and the transference of Certified
Emissions Reductions (CERs). Its functions should be limited to:

verify the proper application of the multiple guidelines to be provided by the

Conference of the Parties and/or the Meeting of the Parties (COP/MOP), issue CERs,
ERUs (Art. 6) and AAUs (Art. 17), create a global registry of projects and CERs,
ERUs and AAUs creation, destruction and transfer, authorize operational entities in
charge of validating, verifying and certifying, retain the share of proceeds to cover
its costs and to feed the adaptation fund, and manage the adaptation fund.

The function of arranging funding for projects should be left to entities independent
from the CDM (project developers/brokers). This would reduce its operational costs
(which would mean more resources for the adaptation fund) and avoid a situation
where it would act both as an intermediary between the Parties and as a project
verifier. As in the case of operational entities, these functions should be carried out
separately by different entities, such as project developers or brokers.

Operational entities authorized by the CDM and the national offices of the host
countries would validate, verify and certify projects and emissions
reductions/enhancement by sinks. Carbon sequestration projects should be eligible
both for Joint Implementation and the CDM, however, given the temporary nature
of the mitigation service they provide, they should be followed by real emissions
reductions by Annex I Parties after a period of time to be determined.

Given the fact that developing countries are expected to reduce their own emissions
somewhere in the future, and that CDM projects are likely to reduce the cheapest
mitigation/sequestration options, their governments should be entitled to retain a
certain percentage of all the CREs produced in their countries.

Ideally, CERs, ERUs and AAUs should be fungible, as they represent the same
commodity. This should be done in a market with no limits on acquisitions or/and
transfers, otherwise there could be a reduced market overloaded with worthless
certificates from the three mechanisms. Limits could be placed after the first
compliance period and be increased starting from there so as to force domestic
measures. This would allow for Annex I Parties to have about a decade to develop
cleaner technologies and to put in place mitigation measures and policies.

All three mechanisms should contribute to the adaptation fund and to cover the
operational costs of the CDM. The potential capacity of the fund to provide
substantial resources for adaptation projects should be assessed so as to determine
whether it is useful to maintain such a fund or if another mechanism should be
created to this end.

Mexico s institutional needs to participate in the CDM

Under this proposal, Mexico would need to develop a structure as the one shown in
Diagram 2.
The Intersecretarial Committee on Climate Change will be in charge of issuing the
guidelines for CDM projects in Mexico, for the participation of operational entities
and participants in such projects and of the governmental mitigation/CDM office.

The office should be maintained with governmental funds and would be in charge
of:

Carrying out some of the activities of the MDL at the national level, for instance,
keeping a national registry of projects, CERs, authorized entities, etc.; verifying the
application of national guidelines and managing the resources for adaptation
projects obtained through the CDM, Providing this information to the global CDM,
Maintaining a national database on mitigation and sequestration options, nationally
developed emissions factors, national inventories, and other emissions - related
information, Developing national emissions factors, mitigation and adaptation
analysis and national inventories, Retaining a share of the CERs of each project to
create a national mitigation fund aimed at compensating the rise in incremental
mitigation costs of the country due to CDM projects, Promoting technology transfer
from Annex I countries.

Private sector participants (project developers/brokers) would need to be

authorized and registered by the governmental office and the CDM. Their objective
would be to identify, develop and finance MDL projects. They would be allowed to
produce their own projects and transfer CERs to Annex I Parties or entities.

GuestBook

Dr. Carlos Gay García