Crediting mechanisms

Two flexibility mechanisms under the Kyoto Protocol – the Clean Development Mechanism (CDM) and Joint Implementation (JI) – have allowed companies to invest in greenhouse gas emissions in developing countries and transition economies and use resulting carbon credits against their compliance obligations domestically. To date, over 7000 CDM projects have been registered, and despite the slump in the prices for Certified Emission Reductions (CERs), projects continue to be registered, and emission reductions are being generated and sold, although how and whether these credits will be valued post-2020 is still an open question.

The expertise that Carbon Limits has garnered following many years of project experience with the CDM and JI is increasingly being used to support the development of new forms of project-based and programmatic crediting, in particular, domestic crediting systems in countries where such a mechanism is being adopted. Importantly, the Paris Agreement recognises international cooperation on such crediting schemes (e.g. bilateral agreements). It also foresees a centralized market mechanism which will be accessible by all countries, and which is expected to draw upon features of the CDM and JI while incorporating new concepts such as “overall mitigation” or “net mitigation”.

Our services with respect to the crediting mechanisms can be summarised as follows:

• Project development: from project identification and assessment, to technical and economic analysis, development of project and programmatic baselines, and preparation of the official documentation for approval and registration

• Project validation and registration: our experience with project development allows us to effectively support project proponents in the process of validation by an independent entity and subsequent project registration

• Project monitoring: to help project owners optimize the issuance of emission reductions, Carbon Limits defines and implements procedures and tools to ensure robust monitoring. We also prepare the monitoring reports and follow the credit issuance process.

• Methodological development: we have developed numerous new and innovative GHG quantification protocols, both as methodologies under the CDM and for internal use by institutions such as multi-lateral development banks and multi-donor climate finance schemes.

Based on our extensive experience in crediting mechanisms, we are increasingly called upon to assist governments in preparing for opportunities arising from the proposed new market based mechanisms. This has so far included a number of analytical studies on results-based funding, support in development of the World Bank’s Pilot Auction Facility (PAF) and support in development of new crediting frameworks and transformational financing mechanisms.