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Leveraging private capital for climate mitigation: Evidence from the Clean Development Mechanism

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  • Bayer, Patrick
  • Marcoux, Christopher
  • Urpelainen, Johannes

Abstract

To mitigate climate change, states must make significant investments into energy and other sectors. To solve this problem, scholars emphasize the importance of leveraging private capital. If states create institutional mechanisms that promote private investment, they can reduce the fiscal cost of carbon abatement. We examine the ability of different international institutional designs to leverage private capital in the context of the Kyoto Protocol's Clean Development Mechanism (CDM). Empirically, we analyze private capital investment in 3749 climate mitigation projects under the CDM, 2003–2011. Since the CDM allows both bilateral and unilateral implementation, we can compare the two modes of contracting within one context. Our model analyzes equilibrium private investment in climate mitigation. When the cost of mitigation is high, unilateral project implementation in one host country, without foreign collaboration, draws more investment than bilateral contracting, whereby foreign investors participate in the project.

Suggested Citation

  • Bayer, Patrick & Marcoux, Christopher & Urpelainen, Johannes, 2013. "Leveraging private capital for climate mitigation: Evidence from the Clean Development Mechanism," Ecological Economics, Elsevier, vol. 96(C), pages 14-24.
    • Handle: RePEc:eee:ecolec:v:96:y:2013:i:c:p:14-24
    DOI: 10.1016/j.ecolecon.2013.09.008
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    Cited by:

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    2. Kim, Jeayoon & Park, Kwangwoo, 2018. "Effect of the Clean Development Mechanism on the deployment of renewable energy: Less developed vs. well-developed financial markets," Energy Economics, Elsevier, vol. 75(C), pages 1-13.
    3. jiemin, Huang & chen, Wen, 2022. "The impact of private sector energy investment, innovation and energy consumption on China's carbon emissions," Renewable Energy, Elsevier, vol. 195(C), pages 1291-1299.
    4. Mandaloufas, Melissa & Lamas, Wendell de Queiroz & Brown, Scott & Irizarry Quintero, Anamari, 2015. "Energy balance analysis of the Brazilian alcohol for flex fuel production," Renewable and Sustainable Energy Reviews, Elsevier, vol. 43(C), pages 403-414.
    5. Mele, Antonio & Paglialunga, Elena & Sforna, Giorgia, 2021. "Climate cooperation from Kyoto to Paris: What can be learnt from the CDM experience?," Socio-Economic Planning Sciences, Elsevier, vol. 75(C).
    6. Jared Cory & Michael Lerner & Iain Osgood, 2021. "Supply Chain Linkages and the Extended Carbon Coalition," American Journal of Political Science, John Wiley & Sons, vol. 65(1), pages 69-87, January.
    7. Patrick Bayer & Christopher Marcoux & Johannes Urpelainen, 2014. "Choosing international organizations: When do states and the World Bank collaborate on environmental projects?," The Review of International Organizations, Springer, vol. 9(4), pages 413-440, December.

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