Joint Nordic project on the carbon market mechanisms

The Nordic countries have earmarked over EUR 1 billion for the purchase of JI or CDM credits. Photo: Patrik Rastenberger

NEFCO has been participating in the so-called Globalization Initiative under the Nordic Council of Ministers during 2010.

The project has focused on the Nordic countries’ experiences from the global Joint Implementation or Clean Development Mechanism (JI / CDM) markets and to assess prospects for possible future Nordic cooperation.

The activity contributed to a very useful exchange of experiences, and there are good perspectives for a strengthened future Nordic cooperation on JI / CDM, focusing on post 2012 period and new mechanisms.

The Nordic countries have different needs for the purchase of JI / CDM credits that are reflected in the design and size of their programmes. Finland established as the first Nordic country an application for flexible mechanisms in 1999, Sweden came in 2002, Denmark in 2003, while Norway only established a programme in 2007. Overall, the Nordic countries have earmarked more than EUR 1 billion for the purchase of JI / CDM credits, and expect to generate a total of 60-75 million JI / CDM credits. Norway has the largest budget of EUR 615 million.

The Nordic countries’ JI / CDM programmes have generally provided a cost-effective complement to national climate change strategies and reduction interventions, and programmes have supported technology transfer and contributed to capacity building and sustainable development in host countries.

NEFCO has been managing climate funds on behalf of the Nordic governments since 2003, and from 2006 admitted private sector participants. In total, funds available for climate financing including JI/CDM are currently EUR 165 million.

Since the regulatory framework is still being negotiated and will not be ready until 2012, the study found that joint Nordic projects and initiatives can have significant positive influence in the negotiation process and the design of new mechanisms. Nordic cooperation should be based on the existing carbon market and in supporting the JI / CDM approach. At the same time it must address a growing need to have increased focus on developing countries, especially LDCs (least developed countries).

There is a need to streamline CDM through standardization of baseline methods and as soon as possible to prepare an active contribution to the development of new scaled sector mechanisms. The advantage of a higher degree of standardization and simplification of the CDM method is lower transaction costs, better geographical distribution, several projects in under-represented sectors (agriculture, transport, households), better environment and greater predictability.

Scaled up or sectoral mechanisms refers to an approach where emission reductions under a pre-determined level credited to whole sectors of developing countries such as Mexico or India’s transport energy. There is already a joint Nordic ad hoc group (NOAK-NEFCO Partnership Initiative) which launched an initial feasibility phase of a new pilot for upscaled credit mechanisms. The partnership will be presented at the UN climate conference in Cancún in December.

Read the full article “Nordic perspectives on carbon market mechanisms”

Read the report “Scoping study for innovative climate finance facilities for testing scaled-up mitigation programmes”

Read more about Nordic co-operation

Learn more about NEFCO’s carbon financing

Find out more about the Kyoto mechanisms

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