Making the Grade: Impacts of Sustainability Assessments on Project Approvals in the Global Carbon Offset Market

Abstract

We investigate whether a common mechanism to achieve global sustainability goals produces uniform results in the world’s largest carbon offset market, the United Nations Clean Development Mechanism. Conventional wisdom suggests that an international regulatory accord designed to stimulate investment in activities to achieve sustainability objectives would yield similar impacts across institutional contexts. But our results illustrate that consideration of various dimensions of sustainability entails inherent tradeoffs among local priorities that can contribute to uneven global outcomes. We show that broader country-level sustainability institutions, and the ministerial offices in which sustainability assessments are made, affect preferences for different types of sustainable development. We discuss the implications for the United Nations Sustainable Development Goals and offer suggestions to regulators and policymakers who design and implement market-based sustainable development systems.