The Kyoto Protocol represents a milestone in the international efforts to tackle climate change. This agreement The work brings relevant has established a legal commitment to aspects, from a historical perspective, reduce anthropogenic emissions of not only of the formatting of the greenhouse gases (GHGs), which can Kyoto Protocol and the CDM, but be achieved through its flexibility also of its effective implementation in Brazil mechanisms, among which is a and contribution to the country. financial incentive called Clean Development Mechanism (CDM). Furthermore, it provides insights on how the progress made Brazil was a pioneer in the over the course of more than two development of CDM projects, decades, since the ratification of registering its first project activity Kyoto, could contribute to the on November 18, 2004. Since them, construction of new mechanisms in until October 2018, 343 Brazilian projects the context of global climate change. had been registered in the United Nations Framework Convention on Climate All this thanks to the collaboration Change (UNFCCC), classifying the of the authors in telling their experiences country as the third largest host of such and expectations with the CDM, projects. making a collection of lessons learned of its implementation in Brazil and Within the scope of the presenting what could constitute a mechanisms new for as insights project “Support to the Brazilian lessons learned and impacts from lessons learned and impacts from CDM legacy. Technical Focal Point to the United Clean Development Mechanism Clean Development LEGACY OF THE CDM OF LEGACY Nations Framework Convention on Climate Change”, commissioned by the the Ministry of Science, Technology, Innovations and Communications (MCTIC), Ipea gathered in this publication the contribution of Brazilian negotiators who had a relevant participation at the UNFCCC, as well as researchers and experts who study the impacts of the CDM contribution in Brazil. Editors The Kyoto Protocol represents a milestone in the international efforts to tackle climate change. This agreement has established a legal commitment to reduce anthropogenic emissions of greenhouse gases (GHGs), which can be achieved through its flexibility mechanisms, among which is a financial incentive called Clean Development Mechanism (CDM). Brazil was a pioneer in the development of CDM projects, registering its first project activity on November 18, 2004. Since them, until October 2018, 343 Brazilian projects had been registered in the United Nations Framework Convention on Climate Change (UNFCCC), classifying the country as the third largest host of such projects. Within the scope of the project “Support to the Brazilian Technical Focal Point to the United Nations Framework Convention on Climate Change”, commissioned by the Ministry of Science, Technology, Innovations and Communications (MCTIC), Ipea gathered in this publication the contribution of Brazilian negotiators who had a relevant participation at the UNFCCC, as well as researchers and experts who study the impacts of the CDM contribution in Brazil. The work brings relevant aspects, from a historical perspective, not only of the formatting of the Kyoto Protocol and the CDM, but also of its effective implementation and contribution to the country. Furthermore, it provides insights on how the progress made over the course of more than two decades, since the ratification of Kyoto, could contribute to the construction of new mechanisms in the context of global climate change. All this thanks to the collaboration of the authors in telling their experiences and expectations with the CDM, making a collection of lessons learned of its implementation in Brazil and presenting what could constitute a CDM legacy. azil r B om in r echanism mechanisms THE CDM M w t e n F n r o f O ts Y h elopme v e D AC as insig G lessons learned and impacts f E Clean L the Editors Federal Government of Brazil Ministry of Economy Minister Paulo Guedes A public foundation affiliated to the Ministry of Economy, Ipea provides technical and institutional support to government actions – enabling the formulation of numerous public policies and programs for Brazilian development – and makes research and studies conducted by its staff available to society. President Carlos von Doellinger Director of Institutional Development Manoel Rodrigues Junior Director of Studies and Policies of the State, Institutions and Democracy Flávia de Holanda Schmidt Director of Macroeconomic Studies and Policies José Ronaldo de Castro Souza Júnior Director of Regional, Urban and Environmental Studies and Policies Nilo Luiz Saccaro Júnior Director of Sectoral Studies and Policies of Innovation and Infrastructure André Tortato Rauen Director of Social Studies and Policies Lenita Maria Turchi Director of International Studies, Political and Economic Relations Ivan Tiago Machado Oliveira Head of Press and Communication Mylena Fiori Ombudsman: http://www.ipea.gov.br/Ouvidoria URL: http://www.ipea.gov.br azil r B om in r echanism mechanisms THE CDM M w t e n F n r Brasília, 2019 Brasília, o f O ts Y h elopme v e D AC as insig G lessons learned and impacts f E Clean L the Editors © Institute for Applied Economic Research – ipea 2019 Legacy of the CDM: lessons learned and impacts from the Clean Development Mechanism in Brazil as insights for new mechanisms / editors: Flavia Witkowski Frangetto, Ana Paula Beber Veiga, Gustavo Luedemann. – Brasília: IPEA, 2019. 417 p. : ill., color. maps Bibliographic references. ISBN: 978-85-7811-363-6 1. Sustainable Development. 2. Environmental Policy. 3. Climate Changes. 4. Gas Emission Control. 5. Economic Aspects. 6. Environment. 7. Brazil. I. Frangetto, Flavia Witkowski. II. Veiga, Ana Paula Beber. III. Luedemann, Gustavo. IV. Instituto de Pesquisa Econômica Aplicada. CDD 333.72 Ficha catalográfica elaborada por Andréa de Mello Sampaio CRB-1/1650 Ipea publications are available for free download in PDF (all) and EPUB (books and periodicals). Access: http://www.ipea.gov.br/portal/publicacoes The opinions expressed in this publication are of exclusive responsibility of the authors, not necessarily expressing the official views of the Institute for Applied Economic Research and the Ministry of Economy. Reproduction of this text and the data contained within is allowed as long as the source is cited. Reproduction for commercial purposes is prohibited. CONTENTS FOREWORD .............................................................................................11 INTRODUCTION .......................................................................................13 PART 1 TWO DECADES OF THE CLEAN DEVELOPMENT MECHANISM CHAPTER 1 THE CLIMATE CHANGE CONVENTION AND ITS KYOTO PROTOCOL AS ACTION DRIVERS ................................................21 Adriano Santhiago de Oliveira José Domingos Gonzalez Miguez Tulio César Mourthé de Alvim Andrade CHAPTER 2 THE CLEAN DEVELOPMENT MECHANISM IN BRAZIL ..................................43 Sonia Regina Mudrovitsch de Bittencourt Susanna Erica Busch Márcio Rojas da Cruz PART 2 THE CDM DEVELOPMENTS IN BRAZIL CHAPTER 3 THE CDM AND KNOWLEDGE-BUILDING IN GHG EMISSIONS REDUCTION QUANTIFICATION: FROM THE INITIAL PROPOSAL TO THE PROGRAM OF ACTIVITIES ...............................................................61 Gustavo Barbosa Mozzer Giampaolo Queiroz Pellegrino CHAPTER 4 EXPERIENCIES AND LESSONS OF CDM IN THE ENERGY SECTOR .................81 Adelino Ricardo J. Esparta Karen M. Nagai CHAPTER 5 ENHANCEMENTS TO THE WASTE MANAGEMENT BASED ON CDM: GOVERNANCE, NEW TECHNOLOGIES AND BETTER PRACTICES IN THE SECTOR ........................................................................................107 João Wagner Silva Alves Adnei Melges de Andrade CHAPTER 6 FOREST CDM IN BRAZIL: FUNDAMENTALS, LEGACY AND ELEMENTS FOR THE FUTURE ............................................................129 Fábio Nogueira de Avelar Marques CHAPTER 7 USE OF THE CDM BY THE BRAZILIAN INDUSTRY: CONSIDERATIONS IN FAVOR OF ENERGY EFFICIENCY AND NEW TECHNOLOGIES .......................................................................179 Ana Paula Beber Veiga CHAPTER 8 CONTRIBUTION OF THE CLEAN DEVELOPMENT MECHANISM TO SUSTAINABLE DEVELOPMENT ........................................205 Henrique de A. Pereira CHAPTER 9 CONTRIBUTIONS OF THE CLEAN DEVELOPMENT MECHANISM TO BUSINESS GOVERNANCE, ACCORDING TO A MARKET AGENT, .........................................................257 Ernesto Cavasin Neto CHAPTER 10 CDM INSTITUTIONAL-REGULATORY EVOLUTION AND FUTURE PERSPECTIVES ....................................................................267 Maria Bernadete Gomes Pereira Sarmiento Gutierrez CHAPTER 11 LEGAL NATURE AND CREDIT AND TAX ISSUES OF CERTIFIED EMISSION REDUCTIONS .....................................................277 Habib Jorge Fraxe Neto Hipólito Gadelha Remígio PART 3 RECENT CLIMATE AGREEMENTS AND NEGOTIATIONS: THE FUTURE OF THE MECHANISM CHAPTER 12 THE CONTINUATION OF THE CDM UNDER THE PARIS AGREEMENT AND ITS ARTICULATION WITH THE SDM ...............................293 José Domingos Gonzalez Miguez Tulio César Mourthé de Alvim Andrade CHAPTER 13 GLOBAL COOPERATION AND CHALLENGES OF SUSTAINABLE DEVELOPMENT: CDM RESULTS AND LESSONS LEARNED FOR THE DESIGN OF NEW FINANCIAL MECHANISMS .....................................313 Philipp Daniel Hauser Rafael Tonelli Fonseca CHAPTER 14 CARBON PRICING: FROM THE KYOTO PROTOCOL TO THEPARIS AGREEMENT........................................................................335 Ronaldo