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The impact of private investor's transaction costs on the cost effectiveness of project-based Kyoto mechanisms

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  • W. Fichtner
  • S. Graehl
  • O. Rentz

Abstract

From a private investor's point of view transaction costs of project-based Kyoto mechanisms relate mainly to project management and interaction with government representatives. However, when analysing the cost effectiveness of project-based Kyoto mechanisms these transaction costs are often underestimated or completely ignored due to limited data availability. This paper presents an analysis of transaction costs of project-based Kyoto mechanisms by applying cost estimates from comparable activities, for example, activities implemented jointly (AIJ). The findings show that transaction costs of AIJ projects range between 7% and more than 100% of production costs with 80% of projects lying between 14 and 89%. Furthermore the data clearly illustrate that "bigger" projects have lower specific project costs indicating the existence of economies of scale. Due to the fact that high transaction costs will push many promising projects out of the market, efforts should be undertaken to reduce transaction costs by improving procedures and business environments, for example, by standardisation.

Suggested Citation

  • W. Fichtner & S. Graehl & O. Rentz, 2003. "The impact of private investor's transaction costs on the cost effectiveness of project-based Kyoto mechanisms," Climate Policy, Taylor & Francis Journals, vol. 3(3), pages 249-259, September.
    • Handle: RePEc:taf:tcpoxx:v:3:y:2003:i:3:p:249-259
    DOI: 10.3763/cpol.2003.0331
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    1. Axel Michaelowa & Marcus Stronzik & Frauke Eckermann & Alistair Hunt, 2003. "Transaction costs of the Kyoto Mechanisms," Climate Policy, Taylor & Francis Journals, vol. 3(3), pages 261-278, September.
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    Cited by:

    1. Trotter, Ian Michael & da Cunha, Dênis Antônio & Féres, José Gustavo, 2015. "The relationships between CDM project characteristics and CER market prices," Ecological Economics, Elsevier, vol. 119(C), pages 158-167.
    2. Michael Grubb & Tim Laing & Thomas Counsell & Catherine Willan, 2011. "Global carbon mechanisms: lessons and implications," Climatic Change, Springer, vol. 104(3), pages 539-573, February.
    3. Thomas Knoke & Michael Weber, 2006. "Expanding Carbon Stocks in Existing Forests – A Methodological Approach for Cost Appraisal at the Enterprise Level," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 11(3), pages 579-605, May.
    4. Krey, Matthias, 2004. "Transaction costs of CDM projects in India: An empirical survey," HWWA Reports 238, Hamburg Institute of International Economics (HWWA).
    5. Krey, Matthias, 2004. "Transaction Costs of CDM Projects in India - An Empirical Survey," Report Series 26112, Hamburg Institute of International Economics.
    6. Krey, Matthias, 2005. "Transaction costs of unilateral CDM projects in India-results from an empirical survey," Energy Policy, Elsevier, vol. 33(18), pages 2385-2397, December.
    7. 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).
    8. Chu, Long & Grafton, R. Quentin & Nguyen, Hai, 2022. "A global analysis of the break-even prices to reduce atmospheric carbon dioxide via forest plantation and avoided deforestation," Forest Policy and Economics, Elsevier, vol. 135(C).
    9. Mundaca, Luis & Mansoz, Mathilde & Neij, Lena & Timilsina, Govinda R, 2013. "Transaction costs of low-carbon technologies and policies : the diverging literature," Policy Research Working Paper Series 6565, The World Bank.
    10. Moss, Jonathan & Cacho, Oscar J., 2014. "Farm-scale analysis of the potential uptake of carbon offset activities," 2014 Conference, August 28-29, 2014, Nelson, New Zealand 187402, New Zealand Agricultural and Resource Economics Society.
    11. Emma Paulsson, 2009. "A review of the CDM literature: from fine-tuning to critical scrutiny?," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 9(1), pages 63-80, February.
    12. Johannes Rosen & Wolf Fichtner & Otto Rentz, 2004. "Baseline Standardisation with Optimising Energy-System Models," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 9(2), pages 121-146, June.

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