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Carbon Leakage from the Clean Development Mechanism

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  • Knut Einar Rosendahl
  • Jon Strand

Abstract

The Clean Development Mechanism (CDM) is an offset mechanism designed to reduce the overall cost of implementing a given target for greenhouse gas (GHG) emissions in industrialized Annex B countries of the Kyoto Protocol, by shifting some of the emission reductions to Non-Annex B countries. This paper analyzes how CDM projects may lead to leakage of emissions elsewhere in Non-Annex B countries. Leakage occurs because emissions reductions under a CDM project may affect market equilibrium in regional and/or global energy and product markets, and thereby increase emissions elsewhere. We also account for potential reverse or negative leakage effects in Non-Annex B from higher emissions cap in Annex B. Our conclusion is that net leakage typically is positive and sizeable, thus leading to an overall increase in global GHG emissions when CDM projects are undertaken. Leakage is greater when the different fossil fuel markets are more segregated.

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Bibliographic Info

Article provided by International Association for Energy Economics in its journal The Energy Journal.

Volume (Year): Volume 32 (2011)
Issue (Month): Number 4 ()
Pages: 27-50

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Handle: RePEc:aen:journl:32-4-a02

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Cited by:
  1. Bofinger, Heinrich & Strand, Jon, 2013. "Calculating the carbon footprint from different classes of air travel," Policy Research Working Paper Series 6471, The World Bank.
  2. Benjamin Jones & Michael Keen & Jon Strand, 2013. "Fiscal implications of climate change," International Tax and Public Finance, Springer, vol. 20(1), pages 29-70, February.
  3. Strand, Jon & Rosendahl, Knut Einar, 2012. "Global emissions effects of CDM projects with relative baselines," Resource and Energy Economics, Elsevier, vol. 34(4), pages 533-548.
  4. Knut Einar Rosendahl & Jon Strand, 2012. "Emissions trading with offset markets and free quota allocations," Discussion Papers 719, Research Department of Statistics Norway.
  5. Mads Greaker & Per Espen Stoknes & Knut H. Alfsen & Torgeir Ericson, 2012. "A Kantian approach to sustainable development indicators for climate change," Discussion Papers 718, Research Department of Statistics Norway.

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