Unilateral CDM—can developing countries finance generation of greenhouse gas emission credits on their own?

The Clean Development Mechanism (CDM) was originally seen as an instrument with a bi- or multilateral character where an entity or fund from an industrialised country invests in a project in a developing country. The sluggish implementation of incentives for industrialised country companies to embark on CDM projects and low carbon prices led to a preference for just buying Certified Emission Reductions (CERs) instead of investing in projects. Thus a third option has gained prominence—the unilateral option where the project development is planned and financed within the developing country. We propose that a project should be called “pure unilateral” if it involves no foreign direct investment (FDI), only has the approval of the Designated National Authority (DNA) of the host country and sells its CERs after certification directly to an industrialised country. Unilateral projects can become attractive if the host country risk premium for foreign investors is high despite a high human, institutional and infrastructural capacity and domestic capital availability. Moreover, transaction costs can be reduced compared to foreign investments that have to overcome bureaucratic hurdles. On the other hand, technology transfer is likely to be lower, capacity building has to be undertaken by the host country and all risks have to be carried by host country entities. The potential to carry out unilateral CDM projects strongly varies among host countries. Whereas several countries from Asia and Latin America can design and implement projects autonomously, most of the Sub-Saharan countries rely on foreign support. International donors of capacity building grants should increasingly address those countries that are not presently focused on by foreign investors and support them in the design of local projects.

An analysis of the relationship between the additionality of CDM projects and their contribution to sustainable development

The Clean Development Mechanism (CDM) allows industrialised countries to use credits from greenhouse gas abatement projects in developing countries in order to fulfil their own emission reduction commitments. There has been mounting evidence that the CDM’s ability to fulfil its goals as stipulated by the Kyoto Protocol—contributing to the sustainable development of the host countries and delivering real, measurable and additional emission reductions—is less than satisfactory. In this article, an evaluation is made of CDM projects’ likelihood of being additional by assessing the impact Certified Emission Reductions have on the Internal Rate of Return of the individual projects. In addition, the projects’ sustainable development benefits are assessed by using a multi-criteria analysis. In a final step, the relationship between the projects’ additionality and sustainability contribution is assessed and a trade-off between these two CDM goals is established, revealing a potential inherent conflict in how the current mechanism works. The analysis is based on a systematic evaluation of 40 registered CDM projects in India.     

Explaining differences in sub-national patterns of clean technology transfer to China and India

The Kyoto Protocol’s Clean Development Mechanism (CDM) has the capacity to incentivize the international transfer of environmentally sound technologies. Given that both countries are expected to have similar incentives when managing the distribution of technology transfer within the country, why do sub-national patterns in the allocation of projects with technology transfer differ? Using comparable political–economic data compiled for China and India, we offer an explanation for these differences. In China, where the government regards the CDM as a tool for achieving sustainable development, technology transfer is concentrated in provinces that need it the most and that are most conducive to receiving transfers (i.e., economically less developed, yet heavily industrialized provinces). In India, where the government takes on a “laissez-faire” approach to the CDM, neither level of economic development nor that of industrialization affects clean technology transfer. In this regard, although the incentives are similar, the capacity to pursue them is not comparable. We test these hypotheses using data on CDM technology transfer across Chinese provinces and Indian states during the 6-year period from 2004 to 2010.     

A Clean Development Mechanism with global atmospheric benefits for a post-2012 climate regime

The Clean Development Mechanism (CDM) under the Kyoto Protocol allows the crediting of emission reductions from greenhouse gas (GHG) abatement projects in developing countries. The CDM is an offsetting mechanism and, in principle, a zero game to the atmosphere: emission reductions achieved from CDM projects allow industrialised countries to increase their emissions, respectively. The article explores how the CDM could be moved beyond a pure offsetting mechanism in a post-2012 climate regime by crediting only a fraction of the emission reductions from CDM projects, thereby providing a net atmospheric benefit. Potential implications on the carbon market are assessed in a qualitative manner and different design options for such a reform to the CDM are discussed. An important conclusion is that the effects on carbon market depend considerably on whether the use of the CDM is limited through caps or not.

Wine, fruit, and emission reductions: the CDM as development strategy in Chile

Through the Clean Development Mechanism (CDM) of the Kyoto Protocol, a developed country actor with a binding emission reduction target can use emission reductions from a project implemented in a developing country to meet this target. At the same time, CDM projects are meant to contribute to sustainable development in the host country, as defined by this country. The CDM is often taken to illustrate a broader contemporary turn in environmental policymaking toward market liberalism, flexibility, and pluralism, where the governance of the CDM involves ??agency beyond the state?? at different political levels and across various jurisdictions. While such an image of the CDM certainly identifies important aspects, it also downplays the ways in which states govern the CDM, not at the international level but at the domestic level through the host country prerogative to define its sustainable development priorities. Early on in the scholarly debate on the CDM, fears were raised about a ??race to the bottom?? with regard to sustainable development requirements on CDM projects. Our research on Chile confirms that hypothesis, with the important addition, that the ??race?? is not simply a structural feature of the CDM, but a deliberate strategy. We argue that Chile has actively chosen to put only marginal emphasis on securing the CDM??s contribution to sustainable development, and instead uses the CDM primarily as a tool to attract foreign investments, treating carbon credits as just another export product.     

The Clean Development Mechanism: A Bane or a Boon for Developing Countries?

We analyse the gains to developing countries from the participation in the CDM during the Kyoto period (until 2010) in the event an emissions trading (ET) regime exists in the post-Kyoto period (2010–20). We show that the developing countries will always be better-off participating in the CDM if the emissions quota they get in the post-Kyoto period is not linked to their baseline emissions. However if their quota equals (or is related to) their baseline emissions, CDM participation strategy may be a preferred alternative only if the CDM price is high enough to off-set the losses of the post-Kyoto period (during ET regime) due to participation in the CDM. We simulate the CDM and ET in the Kyoto and post-Kyoto period and show that with the reduction targets given in the Kyoto Protocol for Annex B countries, participation in the CDM is beneficial to non-Annex B (developing) countries, even if their emissions quota in the post-Kyoto period (during ET regime) is determined by their baseline emissions. Abatement supply price in the post-Kyoto period however turns out to be crucial factor in this case.     

Enhancing the clean development mechanism through sectoral approaches: definitions, applications and ways forward

Grave concerns with the Clean Development Mechanism (CDM) have increasingly surfaced in the international climate policy arena. The sectoral approaches described in this paper may be a way to address some of the shortcomings of this Kyoto mechanism. The paper outlines the criticisms that have been raised against the CDM as well as the conflicting interpretations of a sectoral approach and examines in how far it might resolve the mechanism’s perceived shortcomings. Furthermore, it outlines issues that need to be resolved when implementing a sectoral approach: distributing costs and benefits, defining the sector and its baseline, ensuring additionality and tackling procedural issues. A sectoral approach can enable countries to guide their structural development but it also opens up a gap between public and private investment that needs to be addressed before conflicts arise. Sectoral CDM activities may be able to lower transaction costs for projects that otherwise cannot compete in the CDM market and might even pave the way to sectoral greenhouse gas limitation targets in developing countries by establishing the necessary infrastructure for data collection. However, a sectoral CDM cannot be mistaken for a panacea. Some of the mechanism’s problems remain, which highlights the need to establish additional instruments to support Southern countries in furthering sustainable development and embarking on a low-emission trajectory.

Genesis of the CDM: the original policymaking goals of the 1997 Brazilian proposal and their evolution in the Kyoto protocol negotiations into the CDM

A body of literature is emerging applying critical consideration to the Kyoto Protocol Clean Development Mechanism’s (‘CDM’) achievement of policy goals regarding sustainable development, geographical distribution of projects and related matters. This article places this literature in the context of the policymaking goals of the CDM’s Brazilian architects. The CDM arose from the Brazilian Proposal’s Clean Development Fund, and was negotiated between Brazil and the United States in the weeks preceding the Kyoto Conference of Parties. The CDM’s Brazilian architects continued to pursue their underlying policy goals by taking a leadership position in the Marrakesh Accords negotiations. During this period Brazil’s primary policy objectives comprised achieving meaningful mitigation of GHG emissions to avoid dangerous interference with the climate system, derailing a perceived US/IPCC initiative to allocate emissions cap obligations in the Kyoto Protocol on the basis of current emissions, and taking a leadership position both among the G-77 and China and in the multilateral climate negotiations as a whole. The CDM arose in this context from the G-77 and China’s desire to coerce the North’s compliance with the North’s emissions cap obligations through an alternative means of compliance. As a result, there was no focus on broad conceptions of sustainable development, or on broad distribution of CDM projects throughout the South. Instead, the CDM’s Brazilian architects envisioned that CDM-related sustainable development would arise exclusively from the presence of the CDM projects. Similarly, the Brazilian Proposal advocated allocation of the Clean Development Fund on a basis proportionate to each non-Annex I countries projected 1990–2010 greenhouse gas emissions. These views persisted through the evolution of the Clean Development Fund into the CDM and through Marrakesh Accords negotiations. This article argues that the CDM has largely met the policy goals of its Brazilian architects and that the pursuit of different, additional, refined or more nuanced policy goals necessitates corresponding refinements to the CDM, or any successor mechanism, specifically targeting those different, additional, refined or more nuanced policy objectives, lending support to the emerging literature proposing changes to the CDM to pursue corresponding policy objectives.     

A technology-utilization framework for developing countries

The International Development Research Centre, an agency created two decades ago by the Canadian Parliament and operated by an international board of governors, supports and funds research and development activities outside Canada. Initially it concentrated on building research capacity in developing countries and funding research projects. In the mid-1980s a significant part of the centre's attention shifted to technology transfer. In response to this new emphasis, the author developed what he calls a framework—a set of elements to consider in formulating research projects—for the purpose of improving the chances of transferring and implementing the research results. This article describes the utilization framework, using past research projects to illustrate its eight elements, and briefly describes how the centre has applied it. J. Andre Potworowski, until recently a consultant to the International Development Research Centre in the areas of technology transfer and research utilization, now is a principle with the Hickling Corporation in the management of technology. He has a Ph.D. in physical chemistry from the University of Toronto and an MBA from the Harvard Business School. He also has had various advisory positions with the Science Council of Canada; the Department of Energy, Mines and Resources; the Ministry of State for Science and Technology; and the Secretariat of the Prime Minister's National Advisory Board on Science and Technology.     

A review of the CDM literature: from fine-tuning to critical scrutiny?

As negotiations on the post-2012 climate regime are now taking off, it is time to look back and assess the experiences of the clean development mechanism (CDM) to this date. The CDM has been subject to extensive discussion in academic literature during the last few years, and this article reviews that literature in order to sum up its main themes. A common assessment is that the current structure of the CDM leads to a focus on cheap emissions reductions at the expense of sustainable development benefits for the host countries. Recently, the questionable additionality of many CDM projects has become a central issue. The article further argues that whereas a substantial body of work exists on the CDM, this work is mainly preoccupied with a ‘fine-tuning’ of the mechanism. As the CDM now becomes increasingly institutionalized, scholars should also take a step back and study the CDM in a more theoretically oriented way.

UNFCCC negotiations (pre-Kyoto to COP-9): what the process says about the politics of CDM-sinks

One of the most contentious issues in the negotiations aimed at operationalizing the Kyoto Protocol was the treatment of sinks and, particularly, the eligibility of sinks projects in the Clean Development Mechanism (CDM). This paper attempts to analyse the politics underlying these negotiations, drawing on methods of process tracing, key informant interviews, negotiating texts and secondary literature. Tracing the sinks debate and highlighting key lessons about the nature of global environmental agreements and their institutional arrangements is the first step to recounting the history of the politics of one of the major contemporary international environmental debates. The paper shows that the Kyoto Protocol negotiations on sinks and CDM-sinks were multilaterally supported as a practical solution, but went ‘off track’ due to actors’ interests and tradeoffs. As regards future negotiations on forest sinks in developing countries under the framework of the UNFCCC, the paper argues that these are likely to be influenced by similar constraints, and also by the conservation and development agenda of its supporters; as well as the experience gathered on the CDM and the interests and concerns of developing countries. We broadly frame the paper within the literature on global environmental politics.

Challenges and Outcomes at the Ninth Session of the Conference of the Parties to the United Nations Framework Convention on Climate Change

From 1 to 12 December 2003, the Ninth Session of the Conference of the Parties to the United Nations Framework Convention took place in Milan, Italy. This conference continued the laborious effort of developing an international climate regime by preparing for the Kyoto Protocol’s entry into force. Some two dozen decisions were adopted on a wide range of options for responding to climate change. This paper assesses the progress achieved at the conference on a number of issues. Among these were operational details for implementing forestry projects under the Convention’s Clean Development Mechanism, and guidelines for reporting on greenhouse gas emissions and removals from agriculture, forestry and land-use change. Parties also decided on rules with respect to two funds, the Special Climate Change Fund and the Least Developed Country Fund. With respect to developing countries, Parties continued discussions on rules for building response capacity in light of the expected adverse effects of climate change and transferring environmentally sound technology. They also discussed how to incorporate scientific advice from the Third Assessment Report of the Intergovernmental Panel on Climate Change into the negotiations. Although Russia did not ratify the Kyoto Protocol prior to the conference, Milan demonstrated momentum and interest among Parties to support the climate regime. Nevertheless, it is doubtful whether the detailed discussions were able to contribute to preparing for the long term. To this end, this paper concludes that more discussion and leadership is required to bridge the North/South gap if a post-2012 climate regime is to stand.     

The socialization potential of the CDM in EU–China climate relations

This article hypothesizes that the material incentives associated with the clean development mechanism (CDM) have contributed to the internalization of climate protection norms in China. In current academic research, the CDM has both been extolled as a cost-effective and vilified as an environmentally and ethically inadequate climate mitigation instrument. Few studies so far, however, have looked into the CDM’s potential contribution to socialization-related phenomena such as raising climate change awareness in emerging economies. The relationship with the EU is highly relevant in this context, as the emission reduction credits (CERs) resulting from CDM projects would not have had any meaningful prices without the European Union’s Emissions Trading System (EU ETS). This article aims to fill the current research gap by studying the socialization potential of the CDM in EU–China climate relations in four periods, namely initiation (2001–2005), improvement (2005–2007), consolidation (2008–2010) and habit formation (2010–2014). We argue that there is at least a discernible effect and that the underlying causal mechanism involves the emergence and activities of norm entrepreneurs and habit formation through a process of legal institutionalization.     

Sustainability labelling as a tool for reporting the sustainable development impacts of climate actions relevant to Article 6 of the Paris Agreement

The architecture of global carbon markets has changed significantly since the Paris Agreement and the 2030 Agenda for Sustainable Development Goals were both agreed in 2015. Voluntary, international cooperative approaches established in Article 6 of the Paris Agreement allow Parties to work together to achieve the targets set out in their respective Nationally Determined Contributions to limit global warming to an increase below 1.5–2 °C. In Article 6.4, a sustainable mitigation mechanism is established for which rules, modalities and procedures will be developed internationally considering the experience and lessons learned from existing mechanisms, such as the Clean Development Mechanism (CDM) and its Sustainable Development (SD) Tool. Historically the issue of making integrated assessments of sustainable development and mitigation actions has been politically and methodologically controversial for many reasons: developing countries fear that an international definition of SD will interfere with their sovereignty and therefore their ability to define their own development pathways; players in the carbon market fear that markets can only handle one objective, namely mitigation outcomes; and sustainable development is regarded as too complex and costly to be measured and quantified. In an effort to address these concerns, the article proposes a new methodology for the sustainability labelling of climate mitigation actions relevant to Article 6 approaches. The article draws on an application of the CDM SD tool to analyse 2098 Component Programme Activities that had entered the CDM Pipeline by January 2017. The article demonstrates that assessment of the sustainable development benefits of climate actions can be graded and labelled based on the analysis of qualitative data, which is less costly than applying a quantitative approach.

     

Modeling the international technology transfer process in construction projects: evidence from Thailand

Many developing and newly industrialized countries lack the technical and management capabilities to undertake large and/or complex infrastructure projects. In an effort to more rapidly develop their infrastructure, economies and living standards, many have embarked on a series of international Technology Transfer (TT) initiatives within the construction and other industries. However, these initiatives have not immediately translated into enhanced capabilities and competitiveness within host country firms, resulting in a sustained reliance on foreign firms. In an attempt to improve rates of TT in developing countries, this article proposes a conceptual model for international TT that accommodates the numerous factors believed to impact on the processes effectiveness and derived outcomes. Utilizing the results from a questionnaire survey of 162 industry professionals from Thailand, an international TT model including the significant factors which impact on the TT process and the degree of value added from it, was formulated through exploratory and confirmatory factor analysis. Moreover, the significance of direct and indirect interrelationships between model factors was determined through structural equation modeling. This model included four process enablers, namely, government influence, transferee characteristics, transferor characteristics and relationship building, and one outcome factor named TT value added. Building relationships (i.e. trust, understanding and communication) between the transferor and transferee was determined to be the key predictor of TT-induced value creation for the host construction sector.      

“Monetary” rules for a linked system of offset credits

Three dominant issues have historically plagued climate negotiations: How to bypass issues of sovereignty, generate sufficient climate finance, and establish an agreement that is inclusive of the current major polluters. These issues are prevalent within the Clean Development Mechanism (CDM) under the Kyoto Protocol, and the CDM has provided policy makers with a useful starting point to understanding how offset credits can be utilised within a post-Kyoto framework. The primary aim of this research is to investigate how project-based offset credits generated by states would interact within a linked framework using monetary rules and exchange rates. The examination of a linked system, specifically, was owing to the structure of the proposed agreement to be finalised in Paris at COP 21 where nationally determined contributions would be submitted by each state, allowing for the possibility of linked domestic carbon market mechanisms. The certified emission reduction credits of the CDM were used as a model to investigate the trade of offset credits within a linked system which act as a unique climate currency of each domestic offset credit mechanism. These offset credits could be earned through the implementation of domestic projects or projects hosted in other states. From this research, we conclude that fixed exchange rates are more stable than flexible exchange rates in a climate currency framework. Fixed exchange rates reduce losses of capital (owing to uncertainty in the markets) and the prominence of asymmetric spatial price transmission associated with fiat offset credit prices. To encourage co-operation between developing and developed countries, it is recommended that a combination of currency area theory and trade blocs be implemented as opposed to a currency union. Currency areas are the most viable option as they maintain that the domestic offset credit mechanism is under the control of the state and retains a level of stability as individual state offset credit prices are fixed to the same price. Even though this research forms the basis for a new climate policy architecture, the overall effectiveness of the policy will be determined by the selection of appropriate discount schemes, increased participation and agreement by states, and most significantly, political will.     

Performance of the Global Environmental Facility (GEF) in China: Achievements and Challenges as Seen by the Chinese

This paper discusses the Global Environment Facility (GEF) and its achievements and challenges in China, the country obtaining most GEF support. This paper relies on Chinese perceptions, and less on views from the implementing agencies (IAs), the World Bank, UNDP and UNEP. Most attention is given to climate change and biodiversity. The paper asks what has been achieved; how effective has the GEF been? The study concludes that GEF funding has been important for China’s environmental problems. GEF and its IAs have contributed to raised awareness and technology development and have boosted institutional capacity through participation in project activities and training. The main emphasis has been placed on climate change projects and less on biodiversity. Much has been achieved by the GEF in China, but challenges exist. At the international level, the interests and roles of the GEF system, its IAs and recipient countries are not always compatible. GEF projects may suffer as a consequence. Another challenge relates to the seeming difference in effectiveness between World Bank projects and projects of the other IAs. Domestic challenges concern turf battles, problems related to information sharing, and different priorities among actors. The various government institutions’ reluctance to co-operate impacts significantly on the performance of GEF projects in China. The IAs should insist on smoother collaboration, and force the institutions to work together. Moreover, severe problems are apparent regarding financing as well as application procedures. Improvements are under way regarding the GEF application procedures. This will have a limited impact unless the Chinese side simplifies and improves procedures.     

Exploring the agency of Africa in climate change negotiations: the case of REDD+

Emerging climate change regimes, such as the mechanism for reducing emissions from deforestation and forest degradation (REDD+), are increasingly aiming to engage developing countries such as those in Africa, in sustainable development through carbon markets. The contribution of African countries to global climate negotiations determines how compatible the negotiated rules could be with the existing socioeconomic and policy circumstances of African countries. The aim of this paper is to explore the agency of Africa (African States) in the global climate change negotiations and discuss possible implications for implementing these rules using REDD+ as a case study. Drawing on document analysis and semi-structured expert interviews, our findings suggest that although African countries are extensively involved in the implementation of REDD+ interventions, the continent has a weak agency on the design of the global REDD+ architecture. This weak agency results from a number of factors including the inability of African countries to send large and diverse delegations to the negotiations as well lack of capacity to generate and transmit research evidence to the global platform. African countries also perceive themselves as victims of climate change who should be eligible for support rather than sources of technological solutions. Again, Africa’s position is fragmented across negotiation coalitions which weakens the continent's collective influence on the REDD+ agenda. This paper discusses a number of implementation deficits which could result from this weak agency. These include concerns about implementation capacity and a potential lack of coherence between REDD+ rules and existing policies in African countries. These findings call for a rethink of pathways to enhancing Africa’s strategies in engaging in multilateral climate change negotiations, especially if climate change regimes specifically targeted at developing countries are to be effective.     

碳交易市场中国构建的几点法律思考

《京都议定书》所列出的三种灵活机制,使温室气体减排量成为可以交易的无形商品,为碳交易市场的发展奠定了基础。由于国际法上的不确定性因素以及各国利益诉求的差异,统一的国际碳交易市场尚未形成。中国因“清洁发展机制”项目（CDM）的开发,不可避免地卷入国际碳交易市场中。从发展低碳经济的目标出发,为增强中国在国际碳交易中的竞争能力,笔者建议要适应中国承担的国际义务以及应对气候变化的立场与承诺构建以自愿性减排为主的中国碳交易市场,构建符合中国国情的碳交易法律机制。     

Assigning a grass-root NGO role to legitimate organizations as resident watch-dogs in negotiating carbon benefits derived from multilateral funding

The private sector in North Korea is virtually non-existent, and typical forms of grass-root Non-Governmental Organizations (NGOs) required for forestry carbon trading are not recognized. The state regulates the local forest communities and labor market through central planning and control. Previous researches tend to target grass-root NGOs that were established voluntarily after democratization, while implicitly excluding a state-supervised organization in which residents are members. This paper demonstrates that the carbon benefits secured by forestry projects could be negotiated by a non-voluntary state-supervised organization initially established as a resident watch-dog. Since state-supervised organizations in recipient countries can play a key role in educating grassroots citizens on the true role of NGOs, originated from democratized western countries, this paper will be a valuable reference for accommodating beneficiary obligations specified in multilateral funding. Although North Korea has been selected as a case study for this paper, this kind of peaceful intervention is relevant to other countries that face similar state-supervised resident organizations in implementing multilateral funding projects.