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Defining and Measuring the Development Dividend

Defining and Measuring the Development Dividend. Meeting of the Expert Task Force of the IISD Development Dividend Project March 27-28, 2006 Vancouver Aaron Cosbey, IISD. Outline of Presentation. Overview of recent developments in the CDM – is there still cause for concern?

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Defining and Measuring the Development Dividend

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  1. Defining and Measuring the Development Dividend Meeting of the Expert Task Force of the IISD Development Dividend Project March 27-28, 2006 Vancouver Aaron Cosbey, IISD

  2. Outline of Presentation • Overview of recent developments in the CDM – is there still cause for concern? • Considerations in measuring the development dividend • Proposed assessment tool

  3. CDM: What Has Changed in the Last Year? • Number of projects, CERs, methodologies • Mix of project types • Prices for CERs • Growth in unilateral CDM

  4. 2005: 91 projects (0 registered) 2006: 654 projects (135 registered) Growth = 720%

  5. Shifting of Project Mix in the Pipeline

  6. 2005: 131,599 CERs 2006: 836,266 CERs Growth = 635%

  7. Shifts in CER Distribution in the Pipeline

  8. 2005: 44 projects (48%) 15.5 MtCO2e (12%) 2006: 300 projects (46%) 65 MtCO2e (8%)

  9. 2005: 35 projects (39%) 5,7124 mtCO2e (43%) 2006: 456 projects (70%) 311,569 mtCO2e (37%)

  10. Regional disparity of CERs: Not as bad as it seems? We should expect to see disparities, based on disparities in GDP and population (proxies for project opportunities)

  11. CER Prices Much Higher • May 2005: prices at EUR 5 – 9 • March 2006: • Category 4 transactions as high as EUR 28 • Basic registered projects – up to EUR 20 • Validated, some credit risk – EUR 11 – 12

  12. Is the CDM Delivering the Development Dividend? • Quantity: • 0.84 billion CERs in the pipeline. • Predicted demand for AAUs of 4-5 billion. • Post-2012 uncertainty means CER supply will taper off. • Equity: • Not critically flawed – probably better to focus on overall quality of SD benefits in CDM. • Quality: • Half of all CERs in pipeline are HFC and N2O • Increase in unilateral CDM, possible programmatic CDM • High prices may allow more quality projects. • In the end we do not know.

  13. Assessing the Development Dividend • Why do it? • CDM quality is the key to solving to the quantity problem. • Our recommendations for change need the foundation of a development orientation. • The only way to demonstrate that is by measuring, assessing, projects (ongoing and proposed).

  14. Assessing the Development Dividend • How to do it? • First, need to establish what the tool will be used for. Who might use it? • Buyers: • Regulated market and voluntary markets • Government, IGOs and private sector • Host countries (DNAs) • International policy community

  15. Current Models for Assessment • Qualitative threshold tests • DNAs in India, Brazil, China, others • Discrimination by project type: • China, Columbia regulations • Premium payments by World Bank, CERUPT • Multi-Criteria Analysis (MCA) • SSN Matrix/Gold Standard, CCB standards • Various researchers, analysts

  16. Strengths and Weaknesses • Qualitative threshold tests • Simple to specify • Amenable to country-specific circumstances • Too subjective • Unable to compare projects to one another • Useful for DNAs, not for others

  17. Strengths and Weaknesses • Project-based discrimination • Simple to administer • Able to rank projects, but not within project types • Fails to capture differences between projects of given project types • Useful for buyers, DNAs

  18. Strengths and Weaknesses • Multi-criteria analysis • Able to rank projects against one another • Can be modified to adapt to local priorities • Complex system: choosing criteria, weighting • Information demands are daunting • Useful to buyers, international policy community

  19. Proposed Assessment Tool • “Hybrid” MCA/project type system (with criteria, indicators) applied to project methodologies. • Use elements of existing tools for their specific strengths (e.g., CCB for LULUCF) • Four criteria: social, economic, environmental, integrated • Base score assigned as per methodology, bonus points assigned as per PDD

  20. Proposed Assessment Tool • Threshold requirement: balance among environmental, social, economic criteria • Limited number of indicators, some qualitative • Narrow range of scoring for each indicator (e.g., 1 – 5)

  21. Weaknesses • Insensitive to country-specific circumstances • Accounting for project size may be difficult • How to monitor “bonus undertakings”? • Labour intensive to create: needs extensive stakeholder involvement, applies to large number of meths

  22. What Level of Ambition? • Wide range of possibilities for an assessment tool, with attendant range of necessary commitment of resources. • What would the tool be used for, and by whom?

  23. Aaron Cosbey International Institute for Sustainable Development acosbey@iisd.ca

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