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How to design and use the clean development mechanism under the Kyoto Protocol? A developing country perspective

Listed author(s):
  • M. Germain

    ()

  • A. Magnus
  • V. Steenberghe
Registered author(s):

    Under the Kyoto Protocol, industrialized countries committed to emission reductions may fullfil part of their obligations by implementing emission reduction projects in developing countries. In doing so, they make use of the so-called Clean Development Mechanism (CDM). Two important issues surround the implementation of the CDM. First, if the cheapest abatement measures are implemented for CDM projects, developing countries may be left with only more expensive measures when they have to meet their own commitments in the future (the so-called low-hanging fruits (LHF) issue). Second, a choice must be made on the type of baseline against which emission reductions are measured: an absolute baseline or a relative (to output) one (the baseline issue). The purpose of this paper is to study the interactions between these two issues from the point of view of the developing country. Two major results are obtained. First, when possible future commitments for developing countries and irreversibility of abatement measures are taken into account, we show that the industry where CDM projects are implemented enjoys larger profits under an absolute baseline than under a relative one. Second, concerning the LHF problem, the financial compensation required by the developing country for implementing ‘too many’ CDM projects is larger under the relative baseline. Copyright Springer Science+Business Media, Inc. 2007

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    File URL: http://hdl.handle.net/10.1007/s10640-006-9066-3
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    Article provided by Springer & European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

    Volume (Year): 38 (2007)
    Issue (Month): 1 (September)
    Pages: 13-30

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    Handle: RePEc:kap:enreec:v:38:y:2007:i:1:p:13-30
    DOI: 10.1007/s10640-006-9066-3
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    1. Fischer, Carolyn, 2005. "Project-based mechanisms for emissions reductions: balancing trade-offs with baselines," Energy Policy, Elsevier, vol. 33(14), pages 1807-1823, September.
    2. Millock, Katrin, 2002. "Technology transfers in the Clean Development Mechanism: an incentives issue," Environment and Development Economics, Cambridge University Press, vol. 7(03), pages 449-466, July.
    3. BRECHET, Thierry & GERMAIN, Marc & VAN STEENBERGHE, Vincent, 2004. "The Clean Development Mechanism under the Kyoto Protocol and the `low-hanging fruits' issue," CORE Discussion Papers 2004081, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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