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Clean development mechanism: leverage for development?

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  • Sandrine Mathy
  • Jean-Charles Hourcade
  • Christophe de Gouvello

Abstract

The objective of this paper is to show that the investments through the clean development mechanism (CDM) can exert a leverage effect to (i) make attractive to developing countries non-binding commitments and the adoption of national policies and measures; this comes as a guarantee of non-conditionally of the mechanism to strictly environmental concerns and (ii) create a flow of additional investments and technological transfer from Annex B countries to non-Annex B countries. The Indian power sector has been chosen as an example of a sector where institutional barriers, market imperfections, and tariff distortions create a great space for Pareto improvements and leave an important potential for no-regret measures: technological transfer, air conditioned systems, transport infrastructures and removal of subsidies on consumption. This paper presents a micro-economic formalisation on (i) the evolution of profitability of current emitting technologies used in the power sector under the adoption of national policies and measures and (ii) the impact on renewable energy technologies competitiveness of emission credits in the context of CDM. This formalisation has been developed to enable quantitative simulation. A first exercise using the Markal model (used in 77 countries) on the electric sector in India enabled us to simulate the leverage effect of emission credits on additional incomes taken as a proxy for development.

Suggested Citation

  • Sandrine Mathy & Jean-Charles Hourcade & Christophe de Gouvello, 2001. "Clean development mechanism: leverage for development?," Climate Policy, Taylor & Francis Journals, vol. 1(2), pages 251-268, June.
    • Handle: RePEc:taf:tcpoxx:v:1:y:2001:i:2:p:251-268
    DOI: 10.3763/cpol.2001.0125
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    1. Jaffe, Adam B. & Stavins, Robert N., 1994. "The energy paradox and the diffusion of conservation technology," Resource and Energy Economics, Elsevier, vol. 16(2), pages 91-122, May.
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    1. Jean-Marc Montaud & Nicolas Pecastaing, 2013. "A macroeconomic assessment of the Clean Development Mechanism (CDM) in Peru: A CGE analysis," Working Papers hal-01880341, HAL.
    2. Montaud, Jean-Marc & Pécastaing, Nicolas, 2015. "Clean Development Mechanism (CDM) as a funding opportunity for development: A macroeconomic CGE analysis of the Peruvian experience," Economics Discussion Papers 2015-6, Kiel Institute for the World Economy (IfW Kiel).
    3. Jean-Marc Montaud & Nicolas Pecastaing, 2013. "Does Mexico Benefit from the Clean Development Mechanism? A Macroeconomic and Environmental General Equilibrium Analysis," Working Papers hal-01880342, HAL.
    4. Ghersi, Frederic & Hourcade, Jean-Charles, 2001. "The Economics of a Lost Deal," RFF Working Paper Series dp-01-48-, Resources for the Future.
    5. Kannan, R., 2009. "Uncertainties in key low carbon power generation technologies - Implication for UK decarbonisation targets," Applied Energy, Elsevier, vol. 86(10), pages 1873-1886, October.
    6. Sreekanth, K.J., 2016. "Review on integrated strategies for energy policy planning and evaluation of GHG mitigation alternatives," Renewable and Sustainable Energy Reviews, Elsevier, vol. 64(C), pages 837-850.
    7. Hultman, Nathan E. & Pulver, Simone & Guimarães, Leticia & Deshmukh, Ranjit & Kane, Jennifer, 2012. "Carbon market risks and rewards: Firm perceptions of CDM investment decisions in Brazil and India," Energy Policy, Elsevier, vol. 40(C), pages 90-102.
    8. Sandrine Mathy, 2004. "Comment intégrer les pays en développement dans des politiques climatiques fondées sur un système de quotas d'émissions ?," Revue Tiers-Monde, Armand Colin, vol. 0(1), pages 85-105.
    9. Jean Charles Hourcade & P.-R. Shukla & Sandrine Mathy, 2005. "Cutting the Climate-Development Gordian Knot - Economic options in a politically constrained world," Working Papers hal-00866572, HAL.
    10. Fr�d�ric Ghersi & Jean-Charles Hourcade & Patrick Criqui, 2003. "Viable responses to the equity-responsibility dilemma: a consequentialist view," Climate Policy, Taylor & Francis Journals, vol. 3(sup1), pages 115-133, November.
    11. Pécastaing, Nicolas & Dávalos, Jorge & Inga, Andy, 2018. "The effect of Peru's CDM investments on households’ welfare: An econometric approach," Energy Policy, Elsevier, vol. 123(C), pages 198-207.
    12. Selvaretnam, Geethanjali & Thampanishvong, Kannika, 2010. "Future of the Clean Development Mechanism in Tackling Climate Change," SIRE Discussion Papers 2010-35, Scottish Institute for Research in Economics (SIRE).
    13. Jean Charles Hourcade & Frédéric Ghersi & Patrick Criqui, 2003. "Viable Responses to the equity-responsability dilemna : a consequentialist view," Working Papers halshs-00000965, HAL.
    14. Jean-Marc Montaud & Nicolas Pecastaing, 2013. "A macroeconomic assessment of the Clean Development Mechanism (CDM) in Peru: A CGE analysis," Working Papers hal-01880341, HAL.
    15. Jean-Marc Montaud & Nicolas Pecastaing, 2013. "Does Mexico Benefit from the Clean Development Mechanism? A Macroeconomic and Environmental General Equilibrium Analysis," Working papers of CATT hal-01880342, HAL.
    16. Peter Newell, 2007. "The Kyoto Protocol and Beyond: The World After 2012," Human Development Occasional Papers (1992-2007) HDOCPA-2007-37, Human Development Report Office (HDRO), United Nations Development Programme (UNDP).
    17. Shunli Wang & Henri L.F. de Groot & Peter Nijkamp & Erik T. Verhoef, 2009. "Global and Regional Impacts of the Clean Development Mechanism," Tinbergen Institute Discussion Papers 09-045/3, Tinbergen Institute.
    18. Jean-Marc Montaud & Nicolas Pecastaing, 2013. "A macroeconomic assessment of the Clean Development Mechanism (CDM) in Peru: A CGE analysis," Working papers of CATT hal-01880341, HAL.
    19. Milhau, Antoine & Fallot, Abigail, 2013. "Assessing the potentials of agricultural residues for energy: What the CDM experience of India tells us about their availability," Energy Policy, Elsevier, vol. 58(C), pages 391-402.

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