With the regulatory period of the Kyoto Protocol ending in 2012, and discussions between the Parties to the UNFCCC on a long-term framework for the post-2012 period not expected to conclude before 2009–2010 at the earliest, there is a period of uncertainty regarding the future international climate regime. Moreover, the short-term, compliance-driven buying interests in the current market do not support large, cleaner investments in energy and infrastructure that have long-term emission reduction potential. The current project-by-project approach under the Clean Development Mechanism (CDM) and Joint Implementation (JI) of the Kyoto Protocol incurs high transaction costs and is unlikely to generate the kind of transformation in emission-intensive sectors that large-scale programs can produce. This challenge along with the lack of regulatory framework, has created a limited demand for post–2012 carbon assets.
As a response to these challenges, the new proposed Carbon Partnership Facility is designed to develop emission reductions and support their purchase over long periods after 2012. Its objective and business model are based on the need to prepare large-scale, potentially risky investments with long lead times, which require durable partnerships between buyers and sellers. It is also based on the need to support long-term investments in an uncertain market environment, possibly spanning several market cycles. “Learning by doing” approaches will be an essential aspect of the Carbon Partnership Facility as it moves from individual projects to programmatic approaches, including methodologies needed for such approaches.
Click here for more information on the CPF
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