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ECN publication
Differentiation in the CDM: options and impacts
Bakker, S.J.A.; Asselt, H. van; Gupta, J.; Haug, C.; Saidi, M.A.R.
Published by: Publication date:
ECN Policy Studies 30-7-2009
ECN report number: Document type:
ECN-B--09-009 Book
Number of pages: Full text:
84 Download PDF  

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The clean development mechanism (CDM) is an instrument yielding emission credits from projects in developing countries, that industrialised countries can use to comply with their emission targets, and currently includes over 4000 projects. However, policymakers and scientists have raised concerns with respect to the functioning of the CDM. This includes lack of sustainable development benefits, few projects in Least Developed Countries and the transport sector, a high administrative burden, high windfall profits for some project developers, and questions related to whether the projects actually reduce emissions. Several forms of differentiation between countries or project types have been proposed for the CDM, to address these concerns. This report first provides an overview of these differentiation options. We then analyse their implications for the governance and decision-making processes of the CDM, and provide a quantitative assessment of the impacts on the carbon market, using bottom-up marginal abatement cost curves. We conclude that discounting of CDM credits, demand or supply quota systems, or excluding Parties from participating in the CDM, could help to address several of the concerns raised, but may prove difficult to negotiate. The impact on the carbon market is likely to be limited for most options.

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