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How to design and use the clean development mechanism under the Kyoto Protocol? A developing country perspective

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  • M. Germain
  • A. Magnus
  • V. Steenberghe

Abstract

Under the Kyoto Protocol, industrialized countries committed to emission reductions may fullfil part of their obligations by implementing emission reduction projects in developing countries. In doing so, they make use of the so-called Clean Development Mechanism (CDM). Two important issues surround the implementation of the CDM. First, if the cheapest abatement measures are implemented for CDM projects, developing countries may be left with only more expensive measures when they have to meet their own commitments in the future (the so-called low-hanging fruits (LHF) issue). Second, a choice must be made on the type of baseline against which emission reductions are measured: an absolute baseline or a relative (to output) one (the baseline issue). The purpose of this paper is to study the interactions between these two issues from the point of view of the developing country. Two major results are obtained. First, when possible future commitments for developing countries and irreversibility of abatement measures are taken into account, we show that the industry where CDM projects are implemented enjoys larger profits under an absolute baseline than under a relative one. Second, concerning the LHF problem, the financial compensation required by the developing country for implementing ‘too many’ CDM projects is larger under the relative baseline. Copyright Springer Science+Business Media, Inc. 2007

Suggested Citation

  • M. Germain & A. Magnus & V. Steenberghe, 2007. "How to design and use the clean development mechanism under the Kyoto Protocol? A developing country perspective," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 38(1), pages 13-30, September.
    • Handle: RePEc:kap:enreec:v:38:y:2007:i:1:p:13-30
    DOI: 10.1007/s10640-006-9066-3
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    References listed on IDEAS

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    1. Adam Rose & Erwin Bulte & Henk Folmer, 1999. "Long-Run Implications for Developing Countries of Joint Implementation of Greenhouse Gas Mitigation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 14(1), pages 19-31, July.
    2. Fischer, Carolyn, 2005. "Project-based mechanisms for emissions reductions: balancing trade-offs with baselines," Energy Policy, Elsevier, vol. 33(14), pages 1807-1823, September.
    3. Jiro Akita & Haruo Imai & Hidenori Niizawa, 2005. "Ex-Post CDM BaseLines, Self-Leakage and Counterproductive CDM," KIER Working Papers 607, Kyoto University, Institute of Economic Research.
    4. Millock, Katrin, 2002. "Technology transfers in the Clean Development Mechanism: an incentives issue," Environment and Development Economics, Cambridge University Press, vol. 7(3), pages 449-466, July.
    5. Fischer, Carolyn, 2001. "Rebating Environmental Policy Revenues: Output-Based Allocations and Tradable Performance Standards," Discussion Papers 10709, Resources for the Future.
    6. BRECHET, Thierry & GERMAIN, Marc & VAN STEENBERGHE, Vincent, 2004. "The Clean Development Mechanism under the Kyoto Protocol and the `low-hanging fruits' issue," LIDAM Discussion Papers CORE 2004081, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    Cited by:

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    2. Theresa Stahlke, 2020. "The impact of the Clean Development Mechanism on developing countries’ commitment to mitigate climate change and its implications for the future," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 25(1), pages 107-125, January.
    3. Gregmar Galinato & Shinsuke Uchida, 2010. "Evaluating Temporary Certified Emission Reductions in Reforestation and Afforestation Programs," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 46(1), pages 111-133, May.
    4. Knut Rosendahl & Jon Strand, 2015. "Emissions Trading with Offset Markets and Free Quota Allocations," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 61(2), pages 243-271, June.
    5. Galinato, Gregmar I. & Olanie, Aaron & Uchida, Shinsuke & Yoder, Jonathan K., 2011. "Long-term versus temporary certified emission reductions in forest carbon sequestration programs," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 55(4), pages 1-23.
    6. 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.

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