Macroeconomic Impacts of the Clean Development Mechanism: The Role of Investment Barriers and Regulations

25 Pages Posted: 15 Aug 2008

See all articles by Niels Anger

Niels Anger

ZEW – Leibniz Centre for European Economic Research

Christoph Böhringer

University of Oldenburg - Economic Policy; Centre for European Economic Research (ZEW)

Ulf Moslener

Frankfurt School of Finance & Management gemeinnützige GmbH

Date Written: 2007

Abstract

This paper quantifies the macroeconomic impacts of the Clean Development Mechanism (CDM) under the Kyoto Protocol based on a computable general equilibrium (CGE) model of international trade and energy use. Employing project-based CDM supply data we assess the relative importance of transaction costs and investment risks as well as CDM regulations through supplementarity and additionality criteria. Our numerical results show that the macroeconomic impacts of transaction costs and investment risks are negligible: Given the large supply of cheap project-based emissions credits in developing countries, compliance to the Kyoto Protocol can be achieved at a very low cost. However, regulatory restrictions such as a supplementarity criterion can substantially curtail the potential efficiency gains from where-flexibility in climate policy.

Keywords: Kyoto Protocol, Emissions Trading, Clean Development Mechanism, Computable General Equilibrium

JEL Classification: C68, D61, Q56, Q58

Suggested Citation

Anger, Niels and Bohringer, Christoph and Moslener, Ulf, Macroeconomic Impacts of the Clean Development Mechanism: The Role of Investment Barriers and Regulations (2007). ZEW - Centre for European Economic Research Discussion Paper No. 07-026. Available at SSRN: https://ssrn.com/abstract=985251 or http://dx.doi.org/10.2139/ssrn.985251

Niels Anger (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

Christoph Bohringer

University of Oldenburg - Economic Policy ( email )

Centre for European Economic Research (ZEW) ( email )

D-68161 Mannheim
Germany
+49 6211235200 (Phone)
+49 6211235226 (Fax)

Ulf Moslener

Frankfurt School of Finance & Management gemeinnützige GmbH ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

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