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Dysfunctional delegation: why the design of the CDM's supervisory system is fundamentally flawed

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  • EMMA LUND

Abstract

The supervisory system of the Kyoto Protocol's Clean Development Mechanism (CDM) has been heavily criticized for not being able to guarantee the additionality of projects. Since neither the sellers nor the buyers of emission reduction credits in the CDM have an interest in the emissions reductions per se , but simply the right to them, a credible supervisory system is necessary to uphold the mechanism's integrity. In the CDM, the on-the-ground supervision of projects has been delegated to the Designated Operational Entities (DOEs), which are private companies accredited by the CDM Executive Board (EB) to perform this task. But, as the DOEs are selected and paid by the project developers themselves, they have an economic incentive to let projects through to gain a favourable reputation among clients. Taking its starting point in delegation theory, this article argues that the supervisory system of the CDM is fundamentally flawed, since its design is incompatible with basic theoretical insights from this literature. It concludes that a thorough reform of the CDM's supervisory system is needed in order to increase its credibility. First, the EB should select and pay the DOEs. Second, the current rules for determining additionality should be replaced so as to reduce the arbitrariness of decisions.

Suggested Citation

  • Emma Lund, 2010. "Dysfunctional delegation: why the design of the CDM's supervisory system is fundamentally flawed," Climate Policy, Taylor & Francis Journals, vol. 10(3), pages 277-288, May.
    • Handle: RePEc:taf:tcpoxx:v:10:y:2010:i:3:p:277-288
    DOI: 10.3763/cpol.2009.0031
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    Cited by:

    1. Patrick Hamshere & Liam Wagner, 2012. "Potential Impacts of Subprime Carbon on Australia’s Impending Carbon Market," Energy Economics and Management Group Working Papers 14, School of Economics, University of Queensland, Australia.
    2. Markus Lederer, 2012. "Market making via regulation: The role of the state in carbon markets," Regulation & Governance, John Wiley & Sons, vol. 6(4), pages 524-544, December.
    3. Benites-Lazaro, L.L. & Mello-Théry, N.A., 2019. "Empowering communities? Local stakeholders’ participation in the Clean Development Mechanism in Latin America," World Development, Elsevier, vol. 114(C), pages 254-266.
    4. Jessica F. Green, 2018. "Transnational delegation in global environmental governance: When do non‐state actors govern?," Regulation & Governance, John Wiley & Sons, vol. 12(2), pages 263-276, June.
    5. Teresia Rindefjäll & Emma Lund & Johannes Stripple, 2011. "Wine, fruit, and emission reductions: the CDM as development strategy in Chile," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 11(1), pages 7-22, March.
    6. Karlsson, Rasmus, 2012. "Carbon lock-in, rebound effects and China at the limits of statism," Energy Policy, Elsevier, vol. 51(C), pages 939-945.
    7. Lederer, Markus, 2011. "From CDM to REDD+ -- What do we know for setting up effective and legitimate carbon governance?," Ecological Economics, Elsevier, vol. 70(11), pages 1900-1907, September.

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