Reconciling the design of CDM with inborn paradox of additionality concept

Abstract

Additionality of greenhouse gas emission reduction achieved through projects in developing countries has beena matter of heated debate for quite some time. Michael Grubb succintly summarized the inborn paradox of the additionality concept. It reads: “the most ‘cost-effective’ projects may be the least ‘additional’ and strict project additionality would give perverse policy incentives”. The authors begin with elaborating this notion. The dilemmafor policy makers is that, despite the paradox, Kyoto regime desperately needs flexibility to reconcile its ambitious target with difficulties in implementing domestic policies and measures. The solution to it is to give a certain degree of discretionary elements to each party in designing criteria for clean development mechanism (CDM) projects. Such institutional design works because parties do not behave like an economic man but do have propensity to faithfully comply in a tightly woven international interdependence structure as the experience of past multilateral international agreements suggest. Transparency and responsibility will be a prerequisite for such an institutional design to be effective and attain public support. In contrast, a catch-all institutional design that depends heavily on bureaucratic and technological elements will be plagued by Grubb's paradox and fail eventually. Elaborated methodologies for additionality determination will increase importance in the long run and universal rules may be available in future. But we have to begin with learning how the flexibility of Kyoto regime works by doing.