This paper examines the cost of producing emission reduction credits under the Clean Development Mechanism. Using project-specific data, cost functions are estimated using alternative functional forms. ... See More + The results show that, in general, the distribution of projects in the pipeline does not correspond exclusively to the cost of generating anticipated credits. Rather, investment choices appear to be influenced by location and project type considerations in a way that is consistent with variable transaction costs and investor preferences among hosts and classes of projects. This implies that comparative advantage based on the marginal cost of abatement is only one of several factors driving Clean Development Mechanism investments. This is significant since much of the conceptual and applied numerical literature concerning greenhouse gas mitigation policies relies on presumptions about relative abatement costs. The authors also find that Clean Development Mechanism projects generally exhibit constant or increasing returns to scale. In contrast, they find variations among classes of projects concerning economies of time. See Less -
Policy Research Working Paper WPS6262 NOV 01, 2012
Rahman, Shaikh M.; Dinar, Ariel; Larson, Donald F.
Under the Kyoto Protocol, developed countries can only tap mitigation opportunities in developing countries by investing in projects under the Clean Development Mechanism. ... See More + Yet Clean Development Mechanism investments have so far failed to reach many of the high-potential sectors identified by the Intergovernmental Panel on Climate Change. This raises doubts about whether the Clean Development Mechanism can generate an adequate supply of credits from the limited areas where it has proved successful. This paper examines the current trajectory of mitigation projects entering the Clean Development Mechanism pipeline and projects it forward under the assumption that the diffusion of the Clean Development Mechanism will follow a path similar to other innovations. Projections are then compared with pre-Clean Development Mechanism predictions of the mechanisms potential market size to discern whether limits on the types of projects entering the pipeline have limited the expected supply of certified emission reductions. Parameter tests suggest that this is not the case and that currently identified Clean Development Mechanism investments will generate offsets in excess of early model predictions. In particular, under favorable circumstances, the mechanism is on track to deliver an average annual flow of roughly 700 million certified emission reductions by the close of 2012 and nearly to 1,100 million certified emission reductions by 2020. See Less -
Policy Research Working Paper WPS5239 MAR 01, 2010
Rahman, Shaikh M.; Dinar, Ariel; Larson, Donald F.
The Clean Development Mechanism, a provision of The Kyoto Protocol, allows countries that have pledged to reduce their greenhouse gas emissions to gain credit toward their treaty obligations by investing in projects located in developing (host) countries. ... See More + Such projects are expected to benefit both parties by providing low-cost abatement opportunities for the investor-country, while facilitating capital and technology flows to the host country. This paper analyzes the Clean Development Mechanism market, emphasizing the cooperation aspects between host and investor countries. The analysis uses a dichotomous (yes/no) variable and three continuous variants to measure the level of cooperation, namely the number of joint projects, the volume of carbon dioxide abatement, and the volume of investment in the projects. The results suggest that economic development, institutional development, the energy structure of the economies, the level of country vulnerability to various climate change effects, and the state of international relations between the host and investor countries are good predictors of the level of cooperation in Clean Development Mechanism projects. The main policy conclusions include the importance of simplifying the project regulation/clearance cycle; improving the governance structure host and investor countries; and strengthening trade or other long-term economic activities that engage the countries. See Less -
Policy Research Working Paper WPS4786 NOV 01, 2008
Larson, Donald; Dinar, Ariel; Ambrosi, Philippe; Mahfuzur, Shaikh
The scale of investment needed to slow greenhouse gas emissions is larger than governments can manage through transfers. Therefore, climate change policies rely heavily on markets and private capital. ... See More + This is especially true in the case of the Kyoto Protocol with its provisions for trade and investment in joint projects. This paper describes institutions and policies important for new carbon markets and explains their origins. Research efforts that explore conceptual aspects of current policy are surveyed along with empirical studies that make predictions about how carbon markets will work and perform. The authors summarize early investment and price outcomes from newly formed markets and point out areas where markets have preformed as predicted and areas where markets remain incomplete. Overall the scale of carbon-market investment planned exceeds earlier expectations, but the geographic dispersion of investment is uneven and important opportunities for abatement remain untapped in some sectors, indicating a need for additional research on how investment markets work. How best to promote the development and deployment of new technologies is another promising area for study identified in the paper. See Less -
Policy Research Working Paper WPS4761 OCT 01, 2008
Dinar, Ariel; Rahman, Shaikh Mahfuzur; Entler, Rebecca; Ambrosi, Philippe; Larson, Donald F.
|Title||Document Date||Report No.||Document Type||Also available in|
|The cost structure of the clean development mechanism (English) See More +||NOV 01, 2012||WPS6262||Policy Research Working Paper|
|Will the clean development mechanism mobilize anticipated levels of mitigation ? (English) See More +||MAR 01, 2010||WPS5239||Policy Research Working Paper|
|Factors affecting levels of international cooperation in carbon abatement projects (English) See More +||NOV 01, 2008||WPS4786||Policy Research Working Paper|
|Carbon markets, institutions, policies, and research (English) See More +||OCT 01, 2008||WPS4761||Policy Research Working Paper|