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Costs Of Greenhouse Gas Emissions Abatement Under The Clean Development Mechanism

Author

Listed:
  • SHAIKH M. RAHMAN

    () (Department of Agricultural and Applied Economics, Texas Tech University, TX, USA)

  • DONALD F. LARSON

    (Development Research Group, World Bank, Washington, DC, USA)

  • ARIEL DINAR

    (School of Public Policy, University of California, Riverside, CA, USA)

Abstract

This paper examines the costs of emissions abatement through various types of projects financed under the Clean Development Mechanism (CDM) of the Kyoto Protocol. Using project data, cost functions are estimated applying alternative functional forms. Results show that the average cost of abatement decreases with the volume of abatement, showing economies of scale and suggesting that reducing emissions through small projects is relatively expensive. Results also show significant variation in the costs of abatement by project type and location. Nevertheless, the observed distribution of project investments does not closely match the relative cost structure, either by location or project type. Renewable energy projects accounted for 62% of the projects even though they had the second highest cost. Most of the CDM projects are located in emerging economies, principally China, India, and Brazil, even though the fixed costs of establishing CDM projects in these countries are higher than in many other developing countries. Significantly, while much of the conceptual and applied numerical literature concerning greenhouse gas abatement policies relies on presumptions about the structure of abatement cost curves, these findings suggest that comparative advantage is only one of several factors driving CDM investments and that investors hold additional preferences about project location and project type. Finally, results indicate a general, though noncontinuous, downward trend in the costs of abatement for new CDM projects.

Suggested Citation

  • Shaikh M. Rahman & Donald F. Larson & Ariel Dinar, 2015. "Costs Of Greenhouse Gas Emissions Abatement Under The Clean Development Mechanism," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 6(01), pages 1-34.
  • Handle: RePEc:wsi:ccexxx:v:06:y:2015:i:01:n:s2010007815500050
    DOI: 10.1142/S2010007815500050
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    References listed on IDEAS

    as
    1. Mundle, S. & Shankar,m U. & Mehta, S., 1995. "Incentives and Regulation for Pullution Abatement with an Application to Waste Water Treatment," Papers 63, Asian Development Bank.
    2. Collins, Julie, 2007. "Climate Change and Emissions Trading (Power Point)," 2007 Seminar, August 24, 2007, Wellington, New Zealand 97617, New Zealand Agricultural and Resource Economics Society.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Kyoto protocol; CDM projects; greenhouse gas emissions; abatement costs; F53; Q54; Q56; Q58;

    JEL classification:

    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • 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
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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