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How to Make the Clean Development Mechanism Sustainable - The Potential of Rent Extraction

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  • Muller, Adrian

    ()
    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

The Clean Development Mechanism (CDM) should foster sustainable development and greenhouse gas emissions reductions. The design of the CDM and first experience suggest that it may not achieve these goals. Developing countries hosting CDM projects may loose cheap emissions reduction possibilities for their own future use, and sustainable development and technology transfer may not take place. On the other hand, the CDM has the potential to generate considerable rents if permit prices are high or costs low. A deliberate decision on how to distribute these rents should be taken and the potential failure of the CDM in meeting its goals calls for further regulation. I suggest to combine these two issues and to extract the rents by a profit tax. The tax revenues could contribute to national sustainable development strategies, to offset external costs imposed by CDM projects and to extract part of the resource rent they may generate. The international character of the CDM offers a frame for internationally coordinated tax design. This would hedge against a potential race to the bottom.

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File URL: http://hdl.handle.net/2077/2701
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Bibliographic Info

Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 214.

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Length: 19 pages
Date of creation: 31 Aug 2006
Date of revision:
Publication status: Published in Energy Policy, 2007, pages 3203-3212.
Handle: RePEc:hhs:gunwpe:0214

Contact details of provider:
Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Keywords: Clean Development Mechanism; economic rent; rent extraction; profit tax; sustainable development;

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  1. Chichilnisky, Graciela, 1994. "North-South Trade and the Global Environment," American Economic Review, American Economic Association, vol. 84(4), pages 851-74, September.
  2. Eirik S. Amundsen & Christian Andersen & Jan Gaute Sannarnes, 1992. "Rent Taxes on Norwegian Hydropower Generation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 97-116.
  3. Banfi, Silvia & Filippini, Massimo & Mueller, Adrian, 2005. "An estimation of the Swiss hydropower rent," Energy Policy, Elsevier, vol. 33(7), pages 927-937, May.
  4. Jamasb, T. & Pollitt, M., 2000. "Benchmarking and regulation: international electricity experience," Utilities Policy, Elsevier, vol. 9(3), pages 107-130, September.
  5. Yuvaraj Dinesh Babu, N. & Michaelowa, Axel, 2003. "Removing barriers for renewable energy CDM projects in India and building capacity at the state level," HWWA Reports 237, Hamburg Institute of International Economics (HWWA).
  6. Adam Rose & Erwin Bulte & Henk Folmer, 1999. "Long-Run Implications for Developing Countries of Joint Implementation of Greenhouse Gas Mitigation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 14(1), pages 19-31, July.
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Cited by:
  1. Drupp, Moritz A., 2011. "Does the Gold Standard label hold its promise in delivering higher Sustainable Development benefits? A multi-criteria comparison of CDM projects," Energy Policy, Elsevier, vol. 39(3), pages 1213-1227, March.
  2. Kasai, Katsuya, 2012. "Factors Affecting the Distribution of CERs: A Cross-Sectional Empirical Analysis," MPRA Paper 52163, University Library of Munich, Germany, revised Jan 2013.
  3. Suzi Kerr & Adam Millard-Ball, 2012. "Cooperation to Reduce Developing Country Emissions," Working Papers 12_03, Motu Economic and Public Policy Research.
  4. Kasai, Katsuya, 2012. "How can LDCs benefit from the CDM?: A panel data analysis of determinants of CDM project hosting," MPRA Paper 52137, University Library of Munich, Germany, revised Dec 2012.
  5. Purohit, Pallav, 2008. "Small hydro power projects under clean development mechanism in India: A preliminary assessment," Energy Policy, Elsevier, vol. 36(6), pages 2000-2015, June.
  6. Raul Gouvea & Jonathan Linton & Manuel Montoya & Steven Walsh, 2012. "Emerging Technologies and Ethics: A Race-to-the-Bottom or the Top?," Journal of Business Ethics, Springer, vol. 109(4), pages 553-567, September.
  7. Kasai, Katsuya, 2011. "A Cross-Country Empirical Analysis of Determinants of Clean Development Mechanism (CDM) Projects," MPRA Paper 52160, University Library of Munich, Germany, revised Jan 2012.
  8. Nussbaumer, Patrick, 2009. "On the contribution of labelled Certified Emission Reductions to sustainable development: A multi-criteria evaluation of CDM projects," Energy Policy, Elsevier, vol. 37(1), pages 91-101, January.
  9. Liu, Xuemei, 2008. "Rent extraction with a type-by-type scheme: An instrument to incorporate sustainable development into the CDM," Energy Policy, Elsevier, vol. 36(6), pages 1873-1878, June.
  10. Sahu, Santosh Kumar & Narayanan, K., 2013. "Exports and Participation in Clean Development Mechanism [CDM] in Technology Intensive Industries in India," MPRA Paper 50745, University Library of Munich, Germany.
  11. Anna Davies & Niamh Kirwan, 2010. "Rescaling climate justice: sub-national issues and innovations for low carbon futures," The Institute for International Integration Studies Discussion Paper Series iiisdp340, IIIS.
  12. Johannes Alexeew & Linda Bergset & Kristin Meyer & Juliane Petersen & Lambert Schneider & Charlotte Unger, 2010. "An analysis of the relationship between the additionality of CDM projects and their contribution to sustainable development," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 10(3), pages 233-248, September.
  13. Warnecke, Carsten & Wartmann, Sina & Höhne, Niklas & Blok, Kornelis, 2014. "Beyond pure offsetting: Assessing options to generate Net-Mitigation-Effects in carbon market mechanisms," Energy Policy, Elsevier, vol. 68(C), pages 413-422.
  14. Emma Paulsson, 2009. "A review of the CDM literature: from fine-tuning to critical scrutiny?," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 9(1), pages 63-80, February.

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