DISCOUNTING OF CERs TO AVOID CER IMPORT CAPS

The author argues that the Clean Development Mechanism (CDM) lacks environmental integrity due to non-additional projects, leading the EU to propose strict import caps on CERs. To avoid these inefficient caps and reflect 'common but differentiated responsibilities', the paper suggests a discounting system where one tonne of CO2 reduction yields less than one CER, with the discount factor linked to a country's GDP and emissions per capita. While this introduces some economic inefficiency by altering marginal abatement costs, the author contends it is superior to a protectionist EU scenario, as it would maintain higher EU import thresholds and improve the distribution of projects toward poorer countries.

• The Clean Development Mechanism (CDM) is criticized for lacking environmental integrity because many projects are non-additional, meaning they would have occurred without CDM incentives. Research on 52 registered projects in India indicated a high number of non-additional projects, and another study suggested that approximately 40% of projects and 20% of CER volume are likely non-additional.
• The European Commission and European Parliament have expressed mistrust of the CDM and proposed limiting CER imports for the 2013-2020 period. The Commission's proposal includes blocking new CER imports for private companies if international agreements fail to lead to an EU emission reduction target exceeding 20%, or limiting government imports to 0.7 billion CERs.
• Strict EU protectionism regarding CER imports could lead to a market split between 'EU accepted' and 'non-EU-accepted' CERs, potentially triggering a 'boom and bust cycle' and putting strain on the regulatory system as developers rush to get credits into the EU.
• The author proposes a discounting scheme based on a development index combining per capita income (PPP) and per capita emissions. Under one proposed index where discounting starts at the global average, approximately 190 million CERs (5.6% of expected 2013-2020 CERs) would be removed. If discounting starts at half the global average, 962 million CERs (28.2% of total supply) would be slashed.
• Discounting CERs would create a wedge between marginal abatement costs and revenues, making projects in advanced developing countries less competitive. However, this is presented as a 'second best solution' that is still more efficient than a closed EU market, as it would encourage the use of cheaper abatement options and improve the regional distribution of projects toward poorer countries.

APA

Michaelowa, A. (2008). DISCOUNTING OF CERs TO AVOID CER IMPORT CAPS. Climate Strategies. https://climatestrategies.org/wp-content/uploads/2014/11/discounting-of-cers.pdf

Chicago

Michaelowa, Axel. DISCOUNTING OF CERs TO AVOID CER IMPORT CAPS. Climate Strategies, 2008. https://climatestrategies.org/wp-content/uploads/2014/11/discounting-of-cers.pdf.

Wikipedia

{{cite report |last1=Michaelowa |first1=Axel |title=DISCOUNTING OF CERs TO AVOID CER IMPORT CAPS |publisher=Climate Strategies |date=December 2008 |url=https://climatestrategies.org/wp-content/uploads/2014/11/discounting-of-cers.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{michaelowa2008discounting, author = {Michaelowa, Axel}, title = {{DISCOUNTING OF CERs TO AVOID CER IMPORT CAPS}}, institution = {Climate Strategies}, year = {2008}, month = dec, url = {https://climatestrategies.org/wp-content/uploads/2014/11/discounting-of-cers.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }