From the Clean Development Mechanism (CDM) of the Kyoto Protocol to the Sustainable Development Mechanism of the Paris Agreement

The Sustainable Development Mechanism (SDM) under Article 6.4 of the Paris Agreement is designed to replace and improve upon the Clean Development Mechanism (CDM) of the Kyoto Protocol. This transition reflects the evolution of global climate policies and aims to address some of the criticisms and limitations of the CDM. Let’s examine how the SDM is expected to replace the CDM:

1. Scope and Objectives:

   • CDM: Primarily focused on emission reduction and technology transfer to developing countries.
   • SDM: In addition to mitigation, it has a broader focus that includes sustainable development and adaptation to climate change.

2. Country Participation:

   • CDM: The CDM divided countries into developed (Annex I) and developing (non-Annex I) countries.
   • SDM: All countries can participate in both the generation and use of credits, reflecting the principle of common but differentiated responsibilities under the Paris Agreement.

3. Additionality and Baselines:

   • CDM: Included additionality criteria often criticized for being too lax.
   • SDM: Expected to have stricter criteria and more robust baseline methodologies to ensure environmental integrity.

4. Accounting and Avoiding Double Counting:

   • CDM: Lacked clear rules to avoid double counting.
   • SDM: Includes stricter rules to avoid double counting, including corresponding adjustments when emission reductions are transferred.

5. Governance:

   • CDM: Overseen by the CDM Executive Board under the UNFCCC.
   • SDM: A new supervisory body will be established, expected to have more balanced representation and transparent processes.

6. Contribution to Global Mitigation:

   • CDM: Did not have an explicit mechanism to contribute to net global emission reductions.
   • SDM: Includes provisions to ensure a net contribution to global emission mitigation, possibly through the cancellation of a portion of the generated credits.

7. Sustainable Development:

   • CDM: The impact on sustainable development was often secondary and difficult to quantify.
   • SDM: Expected to have more robust and measurable criteria for sustainable development, aligned with the UN Sustainable Development Goals.

8. Transition of Projects and Methodologies:

   • There is ongoing debate on how and to what extent CDM projects and methodologies could transition to the new mechanism.
   • Criteria are likely to be established to determine which CDM projects can continue generating credits under the new system.

9. Scale and Types of Activities:

   • CDM: Primarily individual projects.
   • SDM: Expected to cover a broader range of activities, including programs and possibly sectoral approaches.

10. Use of Credits:

    • CDM: Credits were primarily used for compliance with Kyoto Protocol targets.
    • SDM: Credits can be used for compliance with Nationally Determined Contributions (NDCs) under the Paris Agreement, as well as potentially in voluntary markets and other schemes (such as CORSIA for international aviation).

11. Adaptation and Loss and Damage:

    • CDM: Did not directly address adaptation.
    • SDM: A portion of the revenues is expected to be allocated to an adaptation fund for vulnerable countries.

12. Digitalization and Transparency:

    • CDM: Often slow and bureaucratic processes.
    • SDM: Expected to leverage digital technologies to improve efficiency, transparency, and traceability of credits.

The transition from CDM to SDM represents a significant shift in the global approach to market mechanisms for climate change mitigation. It seeks to learn from the experiences of the CDM, address its shortcomings, and align with the broader objectives of the Paris Agreement. However, many specific details about the implementation of the SDM are still under negotiation and are expected to be developed in the upcoming Conferences of the Parties (COP) of the UNFCCC.

Below you can see the video we have prepared for this purpose:

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