Who Hosts the Clean Development Mechanism? Determinants of CDM Project Distribution

Abstract

The Clean Development Mechanism (CDM) aims to enhance the efficiency of the Kyoto Protocol by providing greenhouse gas emission credits from projects in developing countries. Its unequal distribution among host countries gives rise to both concerns of equity and the question about the volume of carbon credits that can be generated by offset mechanisms. It is expected that more advanced developing countries with greater abatement potential host more CDM projects. The econometric analysis of CDM project distribution finds that economic development and growth, fossil fuel, and renewable energy generation, as well as links to developed countries and institutional quality positively affect the number of projects hosted. Furthermore, more advanced developing countries pursue a higher share of projects without any direct involvement from developed countries.

Keywords: Climate Policy, Carbon Offsets, CDM, Development, Environment

JEL Classification: F19, O19, Q56