Determinants of Investment Costs for CDM Projects in the Energy Industry

Abstract

This study reviewed data from 1350 Clean Development Mechanism (CDM) project design documents for the energy industry; these projects were registered with the United Nations Framework Convention on Climate Change from the European Union Emissions Trading System’s second period (December 2012) to the present. This paper contributes to the literature on the energy industry in that it was the first attempt to directly estimate the issuance price based on CDM PDD data. This study extracted and databased effective samples for investment analysis. In addition, carbon emissions pricing analysis in the energy industry (which has the highest proportion in the CDM sector) was conducted to demonstrate which factors, including renewable energy technology, contribute to changing the investment cost per unit of carbon emissions. Cluster analysis shows that business methods and size are unimportant for classifying clusters; after multiple regression analysis, the technology variable was determined to affect investment cost. The issued price was low, in the order of biomass, wind power, hydropower, and waste heat management technology. The empirical results show that biomass technology has the highest investment efficiency, and the carbon emission issuance price of biomass technologies is lower than that of wind and solar technologies, which the Korean government is investing in actively. Therefore, if by-products and natural resources in rural areas are recycled or reused as biomass raw materials, costs can be reduced and linked to rural regeneration channels.