UPM welcomes the decision taken in December by the Executive Board of the Clean Development Mechanism (CDM EB) on its 108^thmeeting to temporarily extend CDM operations past the end of 2020. This means that CDM projects can continue to operate while negotiators complete the rulebook for Article 6 of the Paris Climate Agreement and decide on the future of the CDM at COP 26 in Glasgow at the end of this year.

“This provisional fix is far from ideal because there remains a lot of uncertainty about longer-term CDM continuation and its transition to Paris market mechanisms. But, at least, there is still some hope that thousands of registered CDM offset projects around the world will not be deprived from receiving the full CER stream for their entire crediting periods, including issuances for vintage 2021+ CERs,” says Martin Dilger, UPM’s Managing Director. “Without any perspective for getting these new CERs, we would have been forced to abandon most of our CDM projects in 2021 due to financial reasons or migrate them to other carbon market standards.”

To avoid such worst-case scenario, IETA, PD Forum and other business observer groups have called repeatedly on UNFCCC negotiators to resolve critical CDM transition issues, such as the extension of crediting periods and CER issuances beyond 2020, as part of the decisions on a rulebook for emissions trading provisions of the Paris Climate Agreement. But Article 6 negotiations at COP 25 in Madrid in 2019 did not deliver the much-awaited outcome and the postponement of COP 26 to end of 2021 due to the COVID-19 pandemic made it impossible to obtain the required regulatory guidance about the CDM before the end of the second commitment period under the Kyoto Protocol on December 31, 2020.

Now, the CDM EB’s interim ruling ensures that, at a minimum, CDM projects and PoAs can continue to operate and issue CERs until a properly legitimized decision is taken on the issue at COP26. This means that, firstly, thousands of successfully operating CDM projects in developing and emerging countries will keep on generating CERs for achieved GHG emissions reductions pending a formal political decision and that, secondly, several important carbon markets such as South Korea’s ETS or the Carbon Offset and Reduction Scheme for International Aviation (CORSIA) but also the world’s fast growing voluntary carbon offset market will not be cut off abruptly from CER supply already at the start of 2021.

"UPM will continue to monitor any relevant regulatory CDM developments very closely. However regardless of COP26 outcome, UPM is well prepared to guarantee reliable carbon credit supply for our clients. As our most important carbon offset projects, especially the Sichuan Household Biogas PoA, have been registered both under CDM and the Gold Standard, we can deregister these from the CDM, if needed, and continue them as pure Gold Standard projects. After this switch, these projects would then just issue GS VERs instead of GS CERs and this without any vintage restrictions. Of course, the quality and the SDG impact of the projects remain the same", explains Martin Dilger.

For more details about this matter please contact:

Martin Dilger, Managing Director, UPM Germany
mdilger(at)upm-cdm.eu, T: +49 89 1222197 – 50

 

Illustration Photo by Andreas Gücklhorn on Unsplash