A Critical Analysis of the Kyoto Protocol Clean Development Mechanism
Lino Contini
The Clean Development Mechanism ("CDM") proposed in the 1997 Kyoto Protocol holds much promise as a tool to bring about greenhouse gas emissions reductions in an efficient and effective manner. In this paper, three issues (supplementarity, additionality and co-benefits) are examined to assess how the CDM should address them in its operational policy and details. The experiences of the World Bank's Prototype Carbon Fund are used as a guide. The examination attempts to take a "triple bottom line" approach, seeking to balance economic, environmental and social concerns. The paper concludes that supplementarity, although desirable, need not be a requirement of the CDM; market and economic forces should eventually do the 'work' of a supplementarity requirement. Environmental additionality should be determined with reference to project-specific emissions baselines where possible, with resort to multi-project or sectoral baselines where necessary. Financial additionality should be defined as funding that does not originate from official development assistance or other development funding from industrialized countries. Co-benefits to host countries are necessary for a sustainable CDM, and should include improved technological and environmental capacity to enhance host countries competitiveness and success in international trade. By balancing economic, environmental and social concerns of both investors and hosts, the CDM can be a viable and sustainable tool for reducing greenhouse gas emissions.