IDEAS home Printed from https://ideas.repec.org/a/eee/ecolec/v70y2010i1p34-42.html
   My bibliography  Save this article

The impact of discounting emission credits on the competitiveness of different CDM host countries

Author

Listed:
  • Castro, Paula
  • Michaelowa, Axel

Abstract

Discounting the value of emission credits has been proposed as a possible approach for addressing some of the shortcomings of the Clean Development Mechanism (CDM). It could be used to compensate for non-additional CDM projects; to increase the incentive for advanced developing countries to move from the CDM to own mitigation commitments; and to improve the competitiveness of less developed countries as hosts for CDM projects. We assess the impact of discounting on the distribution of CDM projects in host countries, with a special focus on Least Developed Countries (LDCs). CDM-specific abatement cost curves are built for 4 regions: China, India, other advanced Asian countries and LDCs. Abatement costs are estimated using the information provided in the project documentation of 108 projects from 17 subtypes in 16 host countries. Abatement potentials are derived from the current CDM pipeline for each region. For LDCs, we additionally include an optimistic potential estimation by adding to the current pipeline the potential found by a World Bank study for LDCs in Sub-Saharan Africa. We then assess the effect of two emission credit discounting schemes on these abatement cost curves. Credit discounting is differentiated by host countries, based on an index composed of per capita GDP and per capita emissions. In the first scheme, it only affects the most advanced CDM host countries; in the second one it also affects China. We find that discounting has an impact on the competitiveness of individual CDM host countries in the carbon market, as it affects their abatement cost curves. It could become an instrument for incentivising advanced developing countries to leave the CDM and engage in other farther-reaching climate-related commitments, as a result of the resulting emission credit cost increases. However, even with discounting, LDCs remain unimportant in terms of abatement potential if the financial, technical and institutional barriers to CDM development in these countries are not overcome.

Suggested Citation

  • Castro, Paula & Michaelowa, Axel, 2010. "The impact of discounting emission credits on the competitiveness of different CDM host countries," Ecological Economics, Elsevier, vol. 70(1), pages 34-42, November.
    • Handle: RePEc:eee:ecolec:v:70:y:2010:i:1:p:34-42
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0921-8009(10)00118-7
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Silayan, Alan, 2005. "Equitable Distribution of CDM Projects Among Developing Countries," Report Series 26098, Hamburg Institute of International Economics.
    2. Jung, Martina, 2005. "Host Country Attractiveness for CDM Non-Sink Projects," Discussion Paper Series 26328, Hamburg Institute of International Economics.
    3. Jane Ellis & Sami Kamel, 2007. "Overcoming Barriers to Clean Development Mechanism Projects," OECD Papers, OECD Publishing, vol. 7(1), pages 1-50.
    4. Axel Michaelowa, 2003. "CDM host country institution building," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 8(3), pages 201-220, September.
    5. Jung, Martina, 2005. "Host country attractiveness for CDM non-sink projects," HWWA Discussion Papers 312, Hamburg Institute of International Economics (HWWA).
    6. Rae Kwon Chung, 2007. "A CER discounting scheme could save climate change regime after 2012," Climate Policy, Taylor & Francis Journals, vol. 7(2), pages 171-176, March.
    7. Silayan, Alan, 2005. "Equitable distribution of CDM projects among developing countries," HWWA Reports 255, Hamburg Institute of International Economics (HWWA).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Anderson, Blake & M'Gonigle, Michael, 2012. "Does ecological economics have a future?," Ecological Economics, Elsevier, vol. 84(C), pages 37-48.
    2. Stua, Michele, 2013. "Evidence of the clean development mechanism impact on the Chinese electric power system's low-carbon transition," Energy Policy, Elsevier, vol. 62(C), pages 1309-1319.
    3. 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.
    4. Strand, Jon, 2013. "Strategic climate policy with offsets and incomplete abatement: Carbon taxes versus cap-and-trade," Journal of Environmental Economics and Management, Elsevier, vol. 66(2), pages 202-218.
    5. Sabine Aresin, 2015. "Monitoring Abatement in the Presence of an Import Quota on CERs," Working Papers tax-mpg-rps-2015-11, Max Planck Institute for Tax Law and Public Finance.
    6. 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.
    7. Kamleshan Pillay & Jorge E. Viñuales, 2016. "“Monetary” rules for a linked system of offset credits," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 16(6), pages 933-951, December.
    8. 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.
    9. Strand, Jon, 2016. "Mitigation incentives with climate finance and treaty options," Energy Economics, Elsevier, vol. 57(C), pages 166-174.
    10. Igor Shishlov & Valentin Bellassen, 2012. "10 lessons from 10 years of the CDM," Working Papers hal-01151437, HAL.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. John Cole, 2012. "Genesis of the CDM: the original policymaking goals of the 1997 Brazilian proposal and their evolution in the Kyoto protocol negotiations into the CDM," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 12(1), pages 41-61, March.
    3. Kang, Moon Jung & Park, Jihyoun, 2013. "Analysis of the partnership network in the clean development mechanism," Energy Policy, Elsevier, vol. 52(C), pages 543-553.
    4. Jinshan Zhu & Hui Yao & Yingkai Tang & Liyong Wang, 2015. "An econometric analysis of sub-national Clean Development Mechanism performance in China," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 20(7), pages 1137-1153, October.
    5. Anju Singh & Seema Unnikrishnan & Mayuri Naik & Sayee Sayanekar, 2019. "CDM implementation towards reduction of fugitive greenhouse gas emissions," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 21(2), pages 569-586, April.
    6. Claudio Forneri & J�rgen Blaser & Frank Jotzo & Carmenza Robledo, 2006. "Keeping the forest for the climate's sake: avoiding deforestation in developing countries under the UNFCCC," Climate Policy, Taylor & Francis Journals, vol. 6(3), pages 275-294, May.
    7. 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.
    8. Arthur Ssebbugga-Kimeze, 2022. "Opting for plug-in hybrid electric vehicles in Uganda: a non-cooperative game," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 27(6), pages 1-11, August.
    9. Trabucco, Antonio & Bossio, Deborah & van Stratten, O., 2008. "Carbon sequestration, land degradation and water," IWMI Books, Reports H041595, International Water Management Institute.
    10. Joanes Odiwuor Atela & Claire Hellen Quinn & Albert A. Arhin & Lalisa Duguma & Kennedy Liti Mbeva, 2017. "Exploring the agency of Africa in climate change negotiations: the case of REDD+," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 17(4), pages 463-482, August.
    11. Nhan Thanh Nguyen & Minh Ha-Duong & Sandra Greiner & Michael Mehling, 2011. "Implementing the Clean Development Mechanism in Vietnam: potential and limitations," Post-Print halshs-00654294, HAL.
    12. Ceecee Holz & Sivan Kartha & Tom Athanasiou, 2018. "Fairly sharing 1.5: national fair shares of a 1.5 °C-compliant global mitigation effort," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 18(1), pages 117-134, February.
    13. Lambert Schneider, 2009. "Assessing the additionality of CDM projects: practical experiences and lessons learned," Climate Policy, Taylor & Francis Journals, vol. 9(3), pages 242-254, May.
    14. Del Río, Pablo, 2007. "Encouraging the implementation of small renewable electricity CDM projects: An economic analysis of different options," Renewable and Sustainable Energy Reviews, Elsevier, vol. 11(7), pages 1361-1387, September.
    15. van Benthem, Arthur & Kerr, Suzi, 2013. "Scale and transfers in international emissions offset programs," Journal of Public Economics, Elsevier, vol. 107(C), pages 31-46.
    16. Lambert Schneider & Michael Lazarus & Carrie Lee & Harro van Asselt, 2017. "Restricted linking of emissions trading systems: options, benefits, and challenges," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 17(6), pages 883-898, December.
    17. Vasa, Alexander & Neuhoff, Karsten, 2011. "The Role of CDM Post-2012," EconStor Research Reports 65871, ZBW - Leibniz Information Centre for Economics.
    18. Röttgers, Dirk & Grote, Ulrike, 2014. "Africa and the Clean Development Mechanism: What Determines Project Investments?," World Development, Elsevier, vol. 62(C), pages 201-212.
    19. Edsand, Hans, 2016. "Technological Innovation Systems and the wider context: A framework for developing countries," MERIT Working Papers 2016-017, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    20. van der Gaast, Wytze & Begg, Katherine & Flamos, Alexandros, 2009. "Promoting sustainable energy technology transfers to developing countries through the CDM," Applied Energy, Elsevier, vol. 86(2), pages 230-236, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolec:v:70:y:2010:i:1:p:34-42. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolecon .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.