REDD+ in the new market-based mechanism

Climate Change Expert Group (CCXG) Global Forum on the New UNFCCC Market Mechanism and Tracking Climate Finance1

OECD March, 19 2012 Paris, France Durban outcome

. COP17:

 New market-based mechanism defined

 AWG-LCA to conduct a work programme to elaborate modalities and procedures for the mechanism

 One or more workshops to be conducted under the AWG- LCA framework . CMP7:

 Any units generated from market-based mechanisms to be established under the Convention or its instruments may be used by Parties included in Annex I to assist them in achieving compliance with their quantified emission limitation and reduction commitments under Article 3

2

Flexible mechanisms after 2012

Source: IGES (2011) 3 New flexible mechanism (I)

. Level of ambition AI Parties to be increased

. Voluntary for all Parties

. National circumstances and different capacity and capabilities

. Assist developed country Parties in achieving compliance with their commitments under the Convention and the

. Common standards (‘a ton is a ton’) to be applied by all Parties

. Compatibility with the existing market-based mechanism

. Trading Approach: national reference level defined ex-ante and equivalent allowances issued. No commitments but objectives - hybrid approach.

4 New flexible mechanism (II)

. End of the period accounting: If at the end of the period emissions are above the national reference level:

 reserves from previous years can be used or

 negative balanced carried over into the next period . Regulatory Body:

 to develop, administer and ensure that the common standards are applied,

 to ensure environmental integrity,

 to coordinate all existing and new market-based mechanisms . Carbon Reserve Bank: to be established with the view to ensure the regular functioning of the carbon market . Markets: National (ex: New Zealand and Australia) and regional (EU-ETS) market-based mechanisms, which include REDD+ activities, may be used by Parties

5 Ambition: Emissions gap scenario to 2050

Source: Climate Action Tracker 2011 6 Ambition: the role of developing countries

Global GHG emissions Gt CO e per year 2 58 Within ten years, the world needs to reduce global emissions by 14 GtCO e to 2 achieve the 450 ppm pathway1 that would limit 44 average global warming over pre-industrial times to 1990 2000 2010 2020 2030 2ºC by 2100

Cost

EUR/tCO2e Achieving 14 GtCO2e in reductions is possible but 14 18 will require capturing 80% of the world’s emissions 2020 Abatement potential reduction opportunities

GtCO2e

2020 Abatement potential

GtCO2e Developed Of the world’s emission reductions opportunities, countries 4 about 25% is in developed country geographies and about 75% in developing country geographies 14 Developing countries

SOURCE: McKinsey Global GHG Abatement Cost Curve v2.1 Global abatement cost curve, 2020 (up toRole costs of €of60 per REDD+ tonne abated) in Global Abatement Cost Curve

Average Globalcost of Abatementopportunities Cost up Curve to 17 Gt2020= € 0 per tonne abated Cost of abatement (if benefits(up from to negative €60 / ton cost of abatement)on left-hand side fully captured) Cost€/tonne of Abatement (€/ton) 70 60 50 Solar photovoltaic Reduced intensive agriculture conversion 40 Organic soil restoration Solar conc. 30 Grassland management Offshore wind Reduced Pastureland Biomass 20 from pastureland conversion Onshore wind Nuclear 10 Reduced deforestation from slash-and-burn agriculture conversion 0 -10 Rice management 10 15 20 Shift coal new build to gas -20 Electricity from landfill gas Abatement potential -30 New waste recycling Gt CO2e -40 -50 -60 Cars internal combustion engine improvement Breakdown by abatement type -70 Cars aerodynamics improvement • 9 Gt for terrestrial carbon (forestry and agriculture) -80 Retrofit building envelope (commercial) • 6 Gt for energy efficiency -90 • 4 Gt for low carbon energy supply -100 8 SOURCE: McKinsey Global GHG Abatement Cost Curve v2.0 Source: McKinsey Global GHG Abatement Cost Curve v2.0; Project Catalyst analysis Ambition: the role of REDD+

Global deforestation 20% CO2 emissions (IPCC 2007)

Source: FAO (2010) 9

New Markets Mechs: REDD+ Phase 3

Phase I Phase II Phase III

. National . REDD+ strategy . National MRV commitment to . Stake holder . Reporting through develop a REDD+ consultation strategy National . minimum monitoring Communications (as . Grant payments capabilities for NAMAs)

. Safeguards . Market access . Grants payments through a New . Market links Market Mechanism mechanism . Proxies

11 New Market Mechs: Elements for REDD+

. Results Based: Results based activities referred to in paragraph 73, decision 1/CP.16 . National Level: National reference levels, national monitoring systems, national MRV systems and processes, national greenhouse gas inventory reports, and safeguards information systems . MRV: Fully fungible measurable, reportable and verifiable (MRV) emissions reductions units (a ton is a ton) . Environmental integrity: National references and MRVs are critical . Other Elements  Credits for early actions  Price floors  Reserve account  End of term accounting

12 Forest reference emissions levels

• Historical data • National circumstances National Forest REL • Rate of deforestation Reduction Credits • Adjustment factor

Time

13 Securing Demand: Annex-1 Leadership

AAUs

Voluntary ‘carve out’

REDD+ UnitsAAUs Refunded if not achieved

Assigned ‘Carve Out’ equals total of Amount developing country MRVed Units requests for early credit and projected REDD+ results Units from other AAUs based actions. Sectors

Annex I Party Nataional REDD+ country registry 14