Certified emission reductions weights for improved CDM projects

Abstract

AbstractAs currently designed and implemented, the Clean Development Mechanism (CDM) under the Kyoto Protocol is a market mechanism that creates ‘offset’ credits, named CERs (certified emission reductions). These credits are issued to Annex I Parties that invest in projects both reducing emissions and contributing to sustainable development in developing countries. This paper explores how CER weights could be used to reform and improve this mechanism. On the one hand, weights strictly lower than 1, or discount factors, would improve the environmental effectiveness of the CDM, enhancing global greenhouse gas emission mitigation while addressing the additionality concern. On the other hand, weights higher than 1, or multiplication factors, could increase the competitiveness of project types and/or host countries currently underrepresented in the CDM pipeline. This paper concentrates on stimulating investment from developed nations to less developed countries and aims at reducing the disparity between the three main CDM host countries (Brazil, India and China) and less developed nations. Based on statistical data published by the United Nations Framework Convention on Climate Change, our analysis then considers different policies, estimates their impacts, and shows how a sensible mix of discounting and multiplication could lead to a more equitable geographical distribution of CDM projects and possibly create atmospheric benefits. Copyright © 2010 John Wiley & Sons, Ltd and ERP Environment.