Increasing Clean Development Mechanism (CDM) Projects in Asia’s Least Developed Countries - A Strategy for Enhancing Readiness Conditions -

Discussion Paper

Recent years have witnessed a growing interest in bringing more carbon finance to Least Developing Countries (LDCs) from the Kyoto Protocol’s Clean Development Mechanism (CDM). This paper draws upon stakeholder interviews and case studies of biogas projects in Cambodia and Nepal to recommend pragmatic steps for increasing CDM projects in Asia’s LDCs. In contrast to previous studies that call for reforms to the CDM, the paper recommends a carefully calibrated strategy for enhancing carbon finance readiness conditions in LDCs. The paper emphasizes “calibrated” since the costs of phasing in the strategy must be weighed against the benefits from new financial flows. The strategy 1) begins with a clear signal from high-level policymakers to strengthen readiness conditions; 2) makes the commitment to strengthening those conditions credible with a needs assessment of human and data resources; 3) tailors reforms to the unique needs of low hanging sectors such as biogas and operational modalities needed to capture opportunities in those sectors such as program of activities (PoAs); and 4) builds around regional cooperation between CDM champion countries and LDCs with fewer than 10 projects. A carefully planned and deliberately measured response to flows of post-2012 carbon finance may position LDCs favourably to take advantage of a new CDM.