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Perverse incentives under the CDM: an evaluation of HFC-23 destruction projects




The clean development mechanism (CDM) under the Kyoto Protocol allows industrialized countries to use credits from greenhouse gas (GHG) abatement projects in developing countries. A key requirement of the CDM is that the emission reductions be real, measurable and additional. This article uses data from registered projects to evaluate the extent to which these objectives are met by projects that reduce hydrofluorocarbon-23 (HFC-23) emissions in the production of hydrochlorofluorocarbon-22 (HCFC-22). The data show that HCFC-22 plants produced significantly less HFC-23 during periods when no emission credits could be claimed compared with periods when HFC-23 destruction could be credited under the CDM. Moreover, the total amount of HCFC-22 produced appears to be determined mainly by CDM rules. This suggests that the claimed emission reductions may partly not be real and that the CDM provides perverse incentives to generate more HFC-23. The accelerated phase-out of HCFCs under the Montreal Protocol on Substances that Deplete the Ozone Layer could worsen this situation. To address these issues an ambitious emission benchmark for the baseline HFC-23 emissions is proposed.

Suggested Citation

  • Lambert Richard Schneider, 2011. "Perverse incentives under the CDM: an evaluation of HFC-23 destruction projects," Climate Policy, Taylor & Francis Journals, vol. 11(2), pages 851-864, March.
  • Handle: RePEc:taf:tcpoxx:v:11:y:2011:i:2:p:851-864
    DOI: 10.3763/cpol.2010.0096

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    Cited by:

    1. Richard G. Newell & William A. Pizer & Daniel Raimi, 2014. "Carbon Markets: Past, Present, and Future," Annual Review of Resource Economics, Annual Reviews, vol. 6(1), pages 191-215, October.
    2. Richard G. Newell & William A. Pizer & Daniel Raimi, 2013. "Carbon Markets 15 Years after Kyoto: Lessons Learned, New Challenges," Journal of Economic Perspectives, American Economic Association, vol. 27(1), pages 123-146, Winter.
    3. Erickson, Peter & Lazarus, Michael & Spalding-Fecher, Randall, 2014. "Net climate change mitigation of the Clean Development Mechanism," Energy Policy, Elsevier, vol. 72(C), pages 146-154.
    4. Mark Purdon, 2015. "Advancing Comparative Climate Change Politics: Theory and Method," Global Environmental Politics, MIT Press, vol. 15(3), pages 1-26, August.
    5. Trotter, Ian Michael & da Cunha, Dênis Antônio & Féres, José Gustavo, 2015. "The relationships between CDM project characteristics and CER market prices," Ecological Economics, Elsevier, vol. 119(C), pages 158-167.
    6. Purdon, Mark, 2015. "Opening the Black Box of Carbon Finance “Additionality”: The Political Economy of Carbon Finance Effectiveness across Tanzania, Uganda, and Moldova," World Development, Elsevier, vol. 74(C), pages 462-478.
    7. Anne Berner, 2015. "Kurz zum Klima: CDM – wohin geht das Geschäft mit dem Klima?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 68(01), pages 64-66, January.

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