CDM: Current status and possibilities for reform

The Clean Development Mechanism (CDM) has seen a spectacular rise of activity since mid-2005 that has led to more than 400 project submissions with a combined estimated emission reduction volume of 570 million t CO2 eq. until the end of the commitment period. Several technologies have been mobilised in a large scale that had not been predicted to play any significant role. However, many observers continue to criticize the CDM Executive Board's handling of the project cycle and the lack of development benefits of CDM projects. Therefore, calls for CDM reform have gained strength. An analysis of the CDM project portfolio shows that Least Developed Countries and Africa have so far been sidelined. However, more small-scale projects have been submitted than expected from theoretical analyses of project cycle transaction cost, maybe due to high CER price expectations and a high share of unilateral projects. While developing country companies have been able to capture almost half of the CDM consultancy market, they have not made an inroad into validation and verification. The concentration of host countries has increased. Development benefits of CDM projects are often limited, especially of the large projects destroying industrial gases. The rejection rate of proposed methodologies remains stubbornly high but consolidation of methodologies simplifies document submissions. The time lag from submission of project documentation to registration has recently been falling. Additionality testing is a key element that also supports the development target of the CDM.