Carbon leakage from the clean development mechanism
AbstractThe 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, taking into account also potential (negative) leakage effects from less emission reductions in Annex B. 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 find that overall leakage typically will be positive and sizeable, thus leading to an overall increase in global GHG emissions when CDM projects are undertaken. The leakage rate is greatest when the different fossil fuel markets are more segregated.
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Bibliographic InfoPaper provided by Research Department of Statistics Norway in its series Discussion Papers with number 591.
Date of creation: Sep 2009
Date of revision:
Carbon leakage; Clean Development Mechanism; Kyoto protocol;
Other versions of this item:
- Knut Einar Rosendahl & Jon Strand, 2011. "Carbon Leakage from the Clean Development Mechanism," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 27-50.
- F18 - International Economics - - Trade - - - Trade and Environment
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-10 (All new papers)
- NEP-ENE-2009-10-10 (Energy Economics)
- NEP-ENV-2009-10-10 (Environmental Economics)
- NEP-PPM-2009-10-10 (Project, Program & Portfolio Management)
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- Knut Einar Rosendahl & Jon Strand, 2012.
"Emissions trading with offset markets and free quota allocations,"
719, Research Department of Statistics Norway.
- Rosendahl, Knut Einar & Strand, Jon, 2012. "Emissions trading with offset markets and free quota allocations," Policy Research Working Paper Series 6281, The World Bank.
- 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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