Mapping the Indicators. An Analysis of Sustainable Development Requirements of Selected Market Mechanisms and Multilateral Institutions

Investors are paying more and more attention to the co-benefits of climate finance. Financing activities aimed at emission mitigation must not only result in the reduction of greenhouse gas emissions, the enhancement of mitigation, adaptive capacity and adaptation strategies, but should also produce additional outcomes on other environmental, social or economic aspects of sustainable development.

The Clean Development Mechanism (CDM) was created precisely to cover these two aspects: firstly, to achieve cost-effective mitigation of greenhouse gases and secondly, to assist developing countries in achieving sustainable development based on their national development priorities and strategies. However, complying with the second objective turned out to be problematic.

Registered projects appeared that had no proven sustainable development benefits, or even perceived negative impacts. Consequently, critique was raised that the current set-up is weak due to the lack of clear and transparent sustainable development criteria in many host countries, and whether the intended sustainable development benefits are actually achieved in the absence of standards or monitoring, reporting and verification procedures,.

To strengthen the current system for assessing the impact of sustainable development within CDM projects, even the High-Level Panel on the CDM Policy Dialogue recommended introducing monitoring, reporting and verification schemes for measuring the outcomes. The accent was to enhance safeguards against the risk of negative impact and to support host countries with capacity-building and sharing examples of best practice.

The issue was raised to the highest political level when the CMP to the Kyoto Protocol in Durban requested the CDM Executive Board to develop voluntary measures with the aim of highlighting CDM projects’ co-benefits, while preserving the right of host parties to determine their sustainable development criteria.

This decision instigated the UNFCCC Secretariats development of the voluntary Sustainable Development Tool, which was approved by the CDM Executive Board in late 2012. A robust assessment of the impact of sustainable development in CDM projects is important to ensure the social and ecological integrity of the mechanism and compliance with the objectives of sustainable development as stated in the Kyoto Protocol.

Research and best practice experience into how sustainable development issues are integrated into mitigation actions through the CDM Sustainable Development Tool and other respective standards can help inform the development of Nationally Appropriate Mitigation Actions and future mechanisms on sustainable development assessment methods.

As sustainable development is a complex multilayer process covering environmental as well as social and economic aspects that can be affected both positively and negatively, there is a variety of possibilities of how to assess the impact an intervention may have. The high number of approaches analysed by this study reflects this.

The contractors assessed the Sustainable Development Tool against international standards for sustainability assessment by comparing it with other mechanisms such as voluntary carbon offset schemes as well as emerging policy frameworks.