Conferencia De Las Partes

Bangladesh is situated in the Asia region, which includes other developing countries such as Pakistan, India, China and Sri Lanka, among others. In this context, it is relevant to analyse the performance of Bangladesh along with such other countries. In Asia, China and India are playing a significant and active role in reaping the benefits of the CDM and similar tools. In fact, both these countries have a dominant position in the Asian carbon market due to possessing a high volume of CDM projects and CERs. China is still ahead of India in hosting the largest number of CDM projects.348 However, before moving to a carbon market analysis of Asia, it is necessary to discuss the carbon market mechanism.

When discussing the market-based mechanism, there are two types; the Kyoto Protocol included a market-based mechanism, while the Paris Agreement uses its own mechanism.

The market-based mechanism was a prominent feature of the Kyoto Protocol. It has also been said that the CDM is the first attempt to solve the environmental and sustainability problems through a market-based mechanism.349 In fact, the CDM establishes a carbon credit market, where sellers from developing countries, which have no binding targets, sell certified emission reduction credits to buyers from developed countries.350 The sellers generate these credits through CDM projects within their own countries, and these are transferred through an international transfer mechanism provided under Article 6 of the Kyoto Protocol. The buyers of these certificates use them to meet their own emission reduction goals.

The announcement of the Paris Agreement (PA) confirmed that the KP mechanisms may not remain in place in the longer term. However, the market-based mechanism of the PA has not yet been announced, so experts are not yet clear about the future of market-based mechanisms for

348 _{Linna Xie et al, ‘Technology Transfer in Clean Development Mechanism (CDM) Projects: Lessons From}

China’ (2013) 19(supp 1) Technological and Economic Development of Economy S471.

349 _Ibid.

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climate change. The primary question is whether the PA will include market-based mechanisms or use only non-market-based approaches. Based on the literature, it appears likely that the Paris Agreement will include the market-based mechanism as well.

According to the IAEA (2017), the mechanism of the PA is of interest to nearly 90 countries that use the existing market-based mechanism to meet their emission reduction targets. A major argument for market-based mechanisms is that, as generally agreed by the parties to the PA, the domestic resources of any one country are not enough to mitigate or combat the impacts of climate change, given the estimate of US$100 billion per annum required for this purpose.351

For this reason, some form of international cooperation is needed, and the use of market-based mechanisms can help the parties to achieve their targets.

The Paris Agreement is characterised by elements such as Nationally Determined Contributions (NDCs), global transparency mechanisms, international cooperation, direct bilateral cooperation, a new sustainable development mechanism (SDM) and non-market- based approaches. A detailed overview of the PA and its mechanism is provided in section 6.2 of this chapter. While details regarding the existence and functionality of a market-based mechanism under the PA have yet been announced, there are similarities between Article 6, 12,and 17 of the Kyoto Protocol and Article 6 of the Paris Agreement; for example, that participation in the mechanism is voluntary and that the mechanism must contribute to the reduction of carbon emissions and promote sustainable development.

The second question is, if the PA does include a market-based mechanism, will it be sufficiently robust? There is a range of evidence related to this question. First, the PA will be better than the Kyoto Protocol in terms of carbon prices because the newly developed system will likely create strong demand, which will help in development and stability of prices.352 _{Second, a closer look}

at Article 4 and Article 6 of the PA clearly show that it is goal-oriented, as it includes timeframes and temperature goals; this suggests it has potential, at least, to achieve its goals.

Third, Article 4.2 gives countries the freedom to maintain and communicate their own emission reduction goals, known as Nationally Determined Contributions (NDCs). However, the selection

351 _{International Atomic Energy Agency, Nuclear Power And Market Mechanisms Under The Paris Agreement}

(IAEA, 2017), <https://www.iaea.org/sites/default/files/np-market-mechanisms-under-paris-agreement.pdf>.

352 _{International Bar Association, The Paris Agreement, The Kyoto Protocol and the Future of the Carbon}

Market (International Bar Association, 2016)

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of NDCs is regulated by a global stocktake under Article 14. The purpose of this stocktake is to ensure that NDCs reflect the maximum potential of every country, and new NDCs must set targets higher than those of previously submitted NDCs. This feature shows that the PA intends to increase efforts to overtake the rate of climate change. There is a challenge for the regulatory body in that the PA does not include a compliance mechanism, which will make it difficult to ensure that every country has met the requirements and criteria while setting its goals.

According to the UNEP’s database, the statistics about the CDM have been adapted for the total number of CDM projects up to the year 2011 and also for the estimated CERs in the period of 2008–2012, along with their sectoral profile.353 In 2011, 7883 CDM projects had been implemented around the world. China had the largest share, with 41.5% of CDM projects, while India had second position with 26.3% of CDM projects. The remaining 13.3% share was held by the small developing countries of Asia including Sri Lanka, Pakistan, Bangladesh and others. Regarding sectoral profiles, 67.4% of CDM projects were implemented in the power sector. The waste management sector had 9.6% of CDM projects, the agriculture sector 7.2% CDM project; 3.7% CDM projects were implemented in the cement sector and 3.6% in the Iron & Steel sector. Other projects were implemented in areas such as oil and gas, forestry and other sectors (See Figure 4.14).354

When the statistics about the CERs were analysed, it was found that the 2941 million CERs had been (or will be) issued against registered CDM projects, showing an average of 590 million CERs every year.355 China again has the leading position, with a 54.5% share in issued CERs. India had 16.1% and other Asian countries hold a 9.5% between them.

353 _{Global CCS Institute, 2.2 Achievements Of The CDM To Date (Global CCS Institute, 2012),}

<https://hub.globalccsinstitute.com/publications/developing-ccs-projects-under-clean-development-mechanism/22- achievements-cdm-date>.

354 _Ibid. 355 _Ibid.

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Figure 4.12: CDM market statistics (Source: UNEP Database, 2011)

The sectoral overview found that 49.4% of CERs have been issued for CDM projects in the power generation sector, 26% for the chemical sector, 9.3% for waste management, 5.6% for iron and steel sector-based projects, 3.2% for agriculture-based projects, 2.7% for the cement industry, 2.4% for oil and gas-based CDM projects and 0.7% for CDM projects in the forestry sector. These statistics show which sectors are attractive for CDM projects.

As the above statistical overview shows, Bangladesh does not show any remarkable performance regarding the use of the CDM. China and India dominate both areas, with significant shares in CDM projects and issued CERs. These statistics are useful for Bangladesh, as they can help it understand the trend of CDM projects (sector based) and use this to target those sectors in its own country to attract the CDM investment projects.