However, this reform will be limited if international ambition to combat climate change does not increase, especially following a collapse in the carbon market this year.
Despite the CDM being responsible for facilitating a substantial amount of foreign investment in developing countries to help them both mitigate and adapt to climate change over the past decade, without an increase in ambition, the CDM will expire along with the first Kyoto commitment period.
This would be a disastrous for international efforts to tackle this global problem. The CDM has been the pivotal, international method for including developing countries in the solution to a problem that will affect all countries.
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Indeed, it is the nations in the developing world which are amongst the most vulnerable when it comes to the effects of dangerous climate change. If the CDM were to cease, this would be a substantial loss to the suite of international policy tools to combat climate change. It is therefore imperative for the CDM to continue into the future.
It is clear that the developed nations who have committed to the extension of Kyoto will still have access to the CDM. However, there is doubt in relation to those countries which have publicly opted out.
Nevertheless, in the interests of reducing greenhouse gas emissions, those countries which have opted out but maintained an emission cap or target, should be allowed to participate in Kyoto. This will ensure the vital climate finance flows in to developing countries, and provides incentives to all developed countries to reduce emissions.
This is the position that Australia should be pursuing in the negotiations in Doha. It is unfortunate that our Kiwi neighbours, Canada and Japan have opted out, but to exclude these nations from utilising the CDM even though they have assumed an emission target, would only mean a backwards step for our ability to combat climate change.
Therefore, Australia should condition its approval of countries participating in the Kyoto mechanisms such as the CDM on these nations adopting an ambitious, and strong emission reduction target.
But to do so, Australia must lead by example and substantially increase its reduction target to at least 15 percent on 2000 levels from the currently pledged 5 percent.
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Increasing this ambition will not only spur on CDM investments within the developing world and ensure that the world is moving in the right direction towards addressing climate change, but it will also ensure the stabilisation and effectiveness of the international and domestic carbon market.
It is in Australia's national interest to ensure that once the first Kyoto period expires it is replaced by an effective secondary phase. A key component of this is ensuring the CDM continues to operate efficiently.
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