Potential Evaluation of CO2 Emissions Reduction by CDM Projects—Project Design to Provide Benefit to Both Developed and Developing Countries

Abstract

The clean development mechanism (CDM) is well known as a part of the flexibility mechanisms of the Kyoto protocol, and is an incentive to transfer technologies from developed countries to developing countries. The promotion of CDM projects is recommended because technology transfers by using CDM, etc., are expected to cost-effectively reduce CO2 emissions and to also contribute to sustainable development in developing countries. CDM contributes not only to the cost-effective achievement of CO2 emissions reduction target of developed countries, but also to sustainable development in developing countries. For the purpose of promoting CDM projects, flexible frameworks have been suggested for the distribution of benefits produced by implementing the projects to adjust unbalanced benefit distributions among the investor and host countries. One of the suggested flexibilities is to let the gross economic profit, all of which is conventionally considered to be given to the developing side country, be partly returned to the developed side country; another is to let the investment be shared between both sides. Through cost-benefit evaluations of the projects of installing combined cycle power generation and cogeneration plants in China as example case studies, it has been verified that the application of these flexibilities heightens the possibilities for the projects to be compatible with CDM under the uncertainties of economic conditions—for example, economic value of the certified CO2 emission reduction. Because there is a huge potential of CO2 emissions reduction due to technology transfers from developed countries to developing countries, the promotion of implementing CDM projects is highly recommended to accelerate the technology transfers.