This week, I will be posting updates on the United Nations Conference on Climate Change discussions being held in Bali, Indonesia.

A major theme of discussions over the past two days was the Clean Development Mechanism (CDM) process, which is a financial mechanism under Kyoto allowing Annex 1 countries to invest in emission reductions projects in developing countries.

The Executive Board of the CDM shared recent statistics on projects, estimating that:

• The current project pipeline is expected to generate +2.5 billion Certified Emissions Reductions (CERs) by the end of the first Kyoto commitment period (2012);
• These CERs will result from more than 2,600 project activities;
• About 150 projects enter the pipeline each month, and no reduction is expected in this trend.

The Executive Board further estimated that:

• $7 billion has or will be invested in CDM projects registered in 2006;
• Sales of CERs generated by CDM projects registered during 2006 is $1.0 to $1.5 billion annually; and
• +$25 billion will be or has been invested in CDM projects registered in 2007.

The Board pointed out that the estimated investment of $5.7 billion in renewable energy and energy efficiency projects through the CDM is roughly triple the official development assistance (estimated at $2 billion) for similar projects in all developing countries during 2006.

At the same time, the CDM was criticized for the poor geographic distribution of projects, with Africa hosting only 23 projects, compared to 527 in Asia & the Pacific and 302 in Latin America & the Caribbean [as of Dec. 5, 2007].

Meanwhile, China and India’s emphasis on per capita emissions was a major point of debate over the past two days, with the Financial Times expressing concerns that the two countries could be “the rock[s] on which dreams of post-Kyoto climate co-operation are broken.”

China called on Annex 1 (developed) countries to reduce greenhouse gas emissions by 25-40% by 2020, while India stressed the importance of collaboration between Annex 1 and non-Annex 1 countries to develop innovating technologies with appropriate intellectual property rights sharing. India also called for no new commitments from non-Annex 1 countries.

For further information about this topic, please contact Akin Gump.