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Carbon leakage from the clean development mechanism

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Author Info

  • Knut Einar Rosendahl
  • Jon Strand

    () (Statistics Norway)

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, 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 Info

Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 591.

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Date of creation: Sep 2009
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Handle: RePEc:ssb:dispap:591

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Keywords: Carbon leakage; Clean Development Mechanism; Kyoto protocol;

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Cited by:
  1. Knut Einar Rosendahl & Jon Strand, 2012. "Emissions trading with offset markets and free quota allocations," Discussion Papers 719, Research Department of Statistics Norway.
  2. 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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