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Decision analysis on CDM project investments

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  • Li, Jing
  • Sabbaghi, Navid

Abstract

The Clean Development Mechanism (CDM) is a mechanism defined in the Kyoto protocol that incentivizes parties to the protocol to fund sustainable development projects in countries that are not party to the protocol. We analyze a target contract financing structure for different CDM projects in order to see under what conditions the financing structure is efficient and to explore the contract's allocation of profit among the firms. In the two broad categories of CDM projects we consider, we find the optimal investment decision for the investor and for the overall system. We also analyze how the residual value of technology would affect the financing, target contract's efficiency and allocation of profit.

Suggested Citation

  • Li, Jing & Sabbaghi, Navid, 2013. "Decision analysis on CDM project investments," International Journal of Production Economics, Elsevier, vol. 146(1), pages 269-280.
    • Handle: RePEc:eee:proeco:v:146:y:2013:i:1:p:269-280
    DOI: 10.1016/j.ijpe.2013.07.010
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    References listed on IDEAS

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    1. Francesco Corielli & Stefano Gatti & Alessandro Steffanoni, 2010. "Risk Shifting through Nonfinancial Contracts: Effects on Loan Spreads and Capital Structure of Project Finance Deals," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(7), pages 1295-1320, October.
    2. Esty, Benjamin C. & Megginson, William L., 2003. "Creditor Rights, Enforcement, and Debt Ownership Structure: Evidence from the Global Syndicated Loan Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(1), pages 37-60, March.
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    4. Shah, Salman & Thakor, Anjan V., 1987. "Optimal capital structure and project financing," Journal of Economic Theory, Elsevier, vol. 42(2), pages 209-243, August.
    5. Richard A. Brealey & Ian A. Cooper & Michel A. Habib, 1996. "Using Project Finance To Fund Infrastructure Investments," Journal of Applied Corporate Finance, Morgan Stanley, vol. 9(3), pages 25-39, September.
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    Cited by:

    1. Subramanian, Nachiappan & Gunasekaran, Angappa, 2015. "Cleaner supply-chain management practices for twenty-first-century organizational competitiveness: Practice-performance framework and research propositions," International Journal of Production Economics, Elsevier, vol. 164(C), pages 216-233.
    2. Sosa, Amanda & Acuna, Mauricio & McDonnell, Kevin & Devlin, Ger, 2015. "Controlling moisture content and truck configurations to model and optimise biomass supply chain logistics in Ireland," Applied Energy, Elsevier, vol. 137(C), pages 338-351.

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