Macroeconomic Impacts of the Clean Development Mechanism: The Role of Investment Barriers and Regulations
AbstractThis paper quantifies the macroeconomic impacts of the Clean Development Mechanism (CDM) under the Kyoto Protocol based on a computable general equilibrium (CGE) model of international trade and energy use. Employing project-based CDM supply data we assess the relative importance of transaction costs and investment risks as well as CDM regulations through supplementarity and additionality criteria. Our numerical results show that the macroeconomic impacts of transaction costs and investment risks are negligible: Given the large supply of cheap project-based emissions credits in developing countries, compliance to the Kyoto Protocol can be achieved at a very low cost. However, regulatory restrictions such as a supplementarity criterion can substantially curtail the potential efficiency gains from where-flexibility in climate policy. --
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Bibliographic InfoPaper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 07-026.
Date of creation: 2007
Date of revision:
Kyoto Protocol; Emissions Trading; Clean Development Mechanism; Computable General Equilibrium;
Find related papers by JEL classification:
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
- Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-06-30 (All new papers)
- NEP-CMP-2007-06-30 (Computational Economics)
- NEP-ENE-2007-06-30 (Energy Economics)
- NEP-ENV-2007-06-30 (Environmental Economics)
- NEP-PPM-2007-06-30 (Project, Program & Portfolio Management)
- NEP-REG-2007-06-30 (Regulation)
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