The Clean Development Mechanism and its implementation in China: an economic analysis

Abstract

Abstract The “low-hanging fruits” (LHF) (or cream-skimming) problem receives some attention in recent years. However, few studies provide formal analysis on the LHF problem and other flaws based on economic theory. This paper investigates the LHF problem of Clean Development Mechanism (CDM) in China. The energy consumption and the Green House Gas (GHG) emission in China are outlined. The details of the CDM projects, including their distribution in China, and the types of projects are summarized. In order to test whether there were LHF problems in China, a simple statistical model is developed. The statistical analysis provides an indirect evidence that the LHF problem exists in China. The results indicate that areas with higher emission of GHG and low level of GDP per capita attract more CDM projects with higher amount of Certified Emission Reductions (CERs). The results are robust after eliminating HFC-23 decomposition projects from the sample.