The active presence of civil society groups at the 1992 Earth Summit in Rio de Janeiro, influenced the participants to include climate change in the agenda of issues that should be dealt with during the summit. As a result, the UNFCCC was formed, and the first steps towards the Kyoto protocol were given (CDMwatch 2003, p.7). After the convention entered into force in 1995, parties have been holding Conferences of Parties (COPs) on a regular bases, where the commitments of the different parties to the reduction of GHGs were negotiated. In a period of ten years eleven COPs have been held, from which COP 3 and COP 7 have been of special relevance for the creation of the CDM.
The Kyoto Protocol was created during COP 3 in 1997. It established that Annex-I parties must reduce their emissions of GHGs to 5% less than their emission levels in 1990 in the commitment period 2008-2012 (UNFCCC 2002, p.4-6) 3. The strategy to be followed in order to achieve the emission reduction targets, was the creation of a market of reduction of GHGs through project-based emission crediting and emission trading (Streck 2004, p,296).
Thus, three flexible market-based mechanisms were created. These are the Joint Implementation (JI), Emission Trading (ET), 4 and the CDM, from which the JI and the CDM are project-based mechanisms, and ET is based on the transfer of emission quotas through monetary transactions. The underlying principles of the three mechanisms are two: (a) mitigation of climate change will take place via market mechanisms, and (b) mitigation activities of countries with emission targets are not limited to their domestic territory. These principles have been present since the first negotiations and have shaped the final form of the three mechanisms. What makes the CDM special is that it involves the implementation of projects in developing countries and that, unlike the other two mechanisms, it has an explicit mandate to promote sustainable development (CDMwatch 2002, p.7).
An important question is: how did the CDM adopt the form it has today? The CDM was born at the end of the COP 3 in Kyoto. It has been often called the 'Kyoto Surprise' (Matsuo 2003, p.197; Streck 2004, p.300) because it was negotiated in the last days of the COP 3 without major prior consultation. It originates from the Activities Implemented Jointly (AIJ), which were a sort of test for project-based mitigation activities and were taking place since COP 1. Annex-I countries showed a lot of interest in including the AIJ in the future Kyoto negotiations, but this interest was not shared by non-Annex I countries. According to Streck (2004, p. 300) these activities were partly interpreted by non-Annex I countries as a new form of colonialism and moreover, evaluations of the AIJ projects were not yet complete at the beginning op COP 3, which did not provide reliable evidence of the benefits. At the end, the concept of CDM came to life based on a combination of proposals coming from Brazil and the United States. The Brazilians had proposed the creation of a Clean Development Fund (CDF) which would be financed by the economic sanctions put on countries non compliant with their reduction commitments. This CDF would help non-Annex I countries establish mitigation and adaptation strategies to climate change. The proposal of the United States for JI was very much focused on increasing flexibility in order to avoid as many domestic economic measures as possible, and already included a sustainable development goal in the JI project activities. With the creation of the CDM, establishing a CDF was given up, but non Annex-I countries gained a new source of funding through the project activities and the generation of CERs that they could sell. As to Annex-I countries, flexibility in meeting reduction commitments was increased, and countries without reduction commitments were also included in the mitigation efforts (Matsuo 2003, p.197-98; Streck 2004, p.301). As I already said, the CDM was created in the last moments of COP 3. It would take its final operational form in 2001 during the COP 7 in Marrakech, where a standardised institutional framework determining the operational rules to follow, was created: the CDM executive board.
An intriguing question is why sustainable development was included in the goals of the CDM. The literature I read does not provide a clear answer to this question, but a close look into it allows to draw certain conclusions. Two considerations should be made.
- Non Annex-I countries did not contribute to the historical emission that caused climate change. It is understandable that they do not want to engage in mitigation activities unless they get something in return.
- The domestic situation of the United States 5 determined that market based mechanisms were the only option left in the negotiations in order to engage developing countries in mitigation activities. Including the sustainable development goals within these market mechanisms would be an offer that non Annex-I countries could not refuse.
I can only conclude that the inclusion of the sustainable development goal in the CDM is the result of trying to develop an instrument of mutual benefit, or in other words, a win-win solution that would not be as successful if CDM project activities were only aimed at reducing GHGs.
