Clean development mechanism: leverage for development?

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.     

Do we know each other? Bilateral ties and the location of clean development mechanism projects

This paper examines how bilateral ties between developed (home) countries and developing (host) countries influence the location of Clean Development Mechanism projects (CDMs). With the home-host country pair as the unit of analysis (2,058 country-pairs), we employ a logistic regression model to analyze decisions of home countries in selecting the location for their CDMs. We are most interested in examining how home countries’ familiarity with the host country influences CDM location decisions. The familiarity factors are: (1) colonial history; (2) bilateral trade; and (3) bilateral aid. Using a binary logistical model, we find that that bilateral familiarity factors strongly influence CDM location decisions. Further, with respect to host country characteristics, we find that total carbon dioxide emissions and UNFCCC specific domestic institutions influence CDM location decisions, but not general investment institutions or high carbon intensity of host country economies.     

Is industrialization still a viable development strategy for developing countries under climate change?

The implications of climate change for economic development strategies in developing countries are explored, in particular whether industrialization still represents a viable development strategy in the context of climate change. Synthesizing the relevant literature and drawing insights from a comparison of Chinese and Indian experiences, it is argued that industrialization still represents an effective and, to some extent, indispensable development strategy, especially for those low- and low–middle-income countries that are affected by deindustrialization.     

Will the Clean Development Mechanism be effectively implemented in China?

Abstract

The purpose of this article is to analyse whether the presence of surplus emission allowance trading jeopardizes the environmental target of an international environmental agreement. We argue that surplus emission allowance trading can be used as an implicit side-payment mechanism to actually bring about higher environmental protection compared with the situation without the trade option. We point to the existence of a fundamental trade-off between costs of compliance and the creation of dynamic incentives to develop cheaper reduction technologies. Implicit side payments, in terms of surplus emission allocations, may be needed in order to establish a compromise between these opposing demands. We identify the shortcomings and benefits of allowing fully flexible permit trading, including the allocation rule of grandfathering.     

Cap-and-trade versus carbon taxes: which market mechanism gets the most attention?

In the debate between carbon taxes and cap-and-trade as a policy response to curbing greenhouse gas emissions, which market-based policy tool tends to garner the most (favorable) media attention? Furthermore, what is the public coverage like of topics such as trade, energy prices, and economic growth and green jobs? Understanding the media’s response to market-based policy mechanisms is important for understanding their ultimate acceptance, or rejection, beyond the academic sphere. One interesting result from this research is that cap-and-trade wins hands down over carbon taxes—it received more, and more positive, media attention in the US in the 22-year time period under study.     

Who and what are carbon markets for? Politics and the development of climate policy

Why have carbon markets been rapidly adopted as policy solutions to climate change in the last decade? Perhaps surprisingly, this question has attracted virtually no attention in the large literature on such markets. The standard arguments given for why carbon markets are good ways to respond to climate change do not explain why such markets have flourished as governance mechanisms in relation to climate. Carbon markets have spread and become taken-for-granted because of the potential they give to certain powerful actors (financiers, specifically) to create new cycles of investment, profits and growth. As a consequence, they make possible a political coalition combining financiers with environmentalists. This coalition has considerable potential to legitimize substantial cuts in carbon emissions in the face of continued opposition from other interests. It is the combination of these two elements – the promotion of specific growth sectors and the construction of a political coalition – that constitutes the principal political virtue of carbon markets. In order to demonstrate this claim, the history of emissions trading is traced and the implication of this analysis is explored for the further building of climate governance centred on carbon markets.     

A ‘safety deposit’ mechanism for US climate policy

US policy makers are currently evaluating options to reduce domestic carbon dioxide emissions, and several economy-wide cap-and-trade proposals have been put forward in the 111th Congress. Despite mounting enthusiasm for cap-and-trade, advocates of this approach have had to defend such proposals against the criticisms that prices in the resulting carbon market will be unstable and that the implied costs of policy might exceed society's willingness to pay for the expected environmental benefits. Allowance borrowing has been proposed as one solution to both of these concerns, with firm-level borrowing intended to mitigate the impacts of transient cost shocks, and system-level borrowing intended to hedge against the risk of early technology bottlenecks. Each of these mechanisms, as proposed, relies upon prescribed constraints, such as interest payments or quantity limits, to protect against overuse. This article introduces a novel mechanism that offers qualitatively similar protection—a firm-level deposit on borrowed allowances that is refundable upon repayment of the emissions debt. However, the deposit mechanism is shown to be both more economically efficient and more effective in mitigating performance risk, when compared to the existing alternatives.     

Do we prioritize floodplains for development and farming? Mapping global dependence and exposure to inundation

Global wetlands and floodplains offer benefits and perils alike for human society. For example, humans rely on natural flood cycles for fisheries and agriculture, yet flooding also caused nearly one trillion USD in damage in the past 30 years and impacts millions of people every year. Looking forward, altered flow regimes or increased drought conditions are expected to affect the natural inundation cycle and its ecosystem services. The current and potential future impacts of flooding and drying events warrant increasing efforts to quantify our dependence and exposure within flooded areas, since any change from current inundation patterns is expected to have consequences for those who rely on regular flood occurrences. This paper provides a baseline global assessment of the dependence and exposure of human populations, urban areas, roads, and agriculture on current inundation patterns. The analysis uses a spatially explicit inundation map at ∼500 m resolution (GIEMS-D15) derived from satellite remote sensing to represent flooding extents and overlays it with current population and land use maps. We find that 35% of the analyzed population, or 2.0 billion people, live inside areas that are prone to inland flooding, which comprise only 12% of the land surface area (excluding marine coastal areas), confirming that population densities within inundation zones are about three-times above global average. Likewise, 35% of urban areas potentially experience regular, seasonal, or infrequent flooding. Agriculture shows a similar pattern with 24% of the world’s cropland in areas of recurring inundation. Finally, we estimate that 18% of the global road network is exposed to inundation during high water periods. These global estimates demonstrate a preferential tendency of human populations, infrastructure, and agriculture to be co-located within inundation areas, making related anthropogenic activities highly susceptible to future changes in flood regimes. The results are intended to offer a suite of first-order estimates as partial input to more holistic risk and vulnerability assessments and to ultimately improve environmental planning and policy at large scales.     

Climate prediction for adaptation: Who needs what?

The role of short- and long-term climate predictions in determining the success of adaptation to climate change is investigated. A simple theoretical model that captures the relationship between adaptive performance, decision structure, and prediction accuracy at different temporal scales is developed, and its implications deduced. It is shown that users who face high adjustment costs (i.e. are inflexible) depend more heavily on accurate long-term predictions than those who are able to adjust their adaptation strategies at low cost. However, the constraints on the accuracy of long-term predictions in order for them to be ‘accurate enough’ to be recommended unreservedly are strongest for precisely those users who desire them most. There are thus intrinsic structural limitations to the utility of long-term predictions for adaptive decision making. In addition, the heterogeneous dependence of adaptive performance on predictions at different temporal scales gives rise to a resource allocation problem for investments aimed at improving predictions so as to maximize their social benefits. It is suggested that an explicit distributional framework that matches users’ needs with scientific feasibility is needed in order to guide such investments, and key issues any such framework will need to address are discussed.     

Market penetration metrics: tools for additionality assessment?

Abstract

Project-based emission reduction or ‘offset’ programs are being implemented widely, from the CDM (Clean Development Mechanism) to corporate voluntary efforts and municipal and state-level activities. Additionality assessment remains a central and persistent challenge in all programs. Concerns have been raised with methods currently used, such as investment analysis, barrier analysis, and performance thresholds. They have been variously critiqued for high costs, resistance to standardization, weak environmental integrity, and susceptibility to gaming. Technology penetration rates provide another means to infer additionality, and could be a potentially useful complement to other methods. The notion is that emerging technologies with low but increasing penetration rates typically require some type of support, as might be provided through offsets markets, to compete effectively in the marketplace. For penetration rate analysis to provide a useful tool for additionality assessment, several fundamental questions need to be addressed. What do penetration rates represent and how can they be measured? How can additionality evaluation utilize penetration rates? For which sectors and project types are the use of penetration rates most promising? This article shows that penetration tests have a mixture of pluses and minuses, with greater relevance in certain market niches and regions. Reasonable ranges for penetration thresholds are discussed, along with partial crediting approaches to reduce ‘knife-edge’ effects.     

When does economic development promote mitigation and why?

Is economic development compatible with mitigation? On the one hand, development should promote effective climate policy by enhancing states’ capacities for mitigation. On the other hand, economic growth creates more demand for production, thereby inhibiting emissions reduction. These arguments are often reconciled in the environmental Kuznets curve (EKC) thesis. According to this approach, development initially increases emissions in poor economies, but begins to lower emissions after a country has attained a certain level of development.

The aim of this article is to determine empirically whether the EKC hypothesis seems plausible in light of emissions trends over the birth and implementation of the Kyoto Protocol. Drawing on data from the World Bank World Development Indicators and World Resources Institute Climate Data Explorer, it conducts a large-N investigation of the emissions behaviour of 120 countries from 1990 to 2012. While several quantitative studies have found that economic factors influence emissions activity, this article goes beyond existing research by employing a more sophisticated – multilevel – research design to determine whether economic development: (a) continues to be a significant driver once country-level clustering is accounted for and (b) has different effects on different countries. The results of this article indicate that, even after we account for country-level clustering and hold constant the other main putative drivers of emissions activity, economic development tends to inhibit emissions reduction. They also provide strong evidence that emissions trends resemble the EKC, with development significantly constraining emissions reduction in the South and promoting it in the North.

POLICY RELEVANCE

This article contributes to the understanding of the (changing) role of economic development in shaping emissions activity. It demonstrates the need for a contextualized, country-specific approach for evaluating the effectiveness of economic development in promoting emissions reduction and uncovers new evidence in support of the EKC hypothesis.     

Who uses the Clean Development Mechanism? An empirical analysis of projects in Chinese provinces

China is by far the largest host of projects implemented under the Kyoto Protocol's Clean Development Mechanism (CDM). However, earlier studies shed little light on the determinants of the distribution of CDM projects across Chinese provinces. Given China's large size and political-economic diversity, this dearth of research is troubling. We provide an empirical analysis of 2097 CDM projects in 30 Chinese provinces, 2004–2009. We find that high electricity consumption, low per capita income, and a lack of foreign direct investment are all associated with CDM project implementation. The findings are particularly strong for electricity and foreign direct investment. These findings are consistent with the economic theory of CDM project implementation. Project developers focus on minimizing the cost of carbon abatement. Moreover, they suggest that the CDM can, despite its limitations, contribute to reducing economic inequality and uneven development in China.     

Co-producing science for sustainability: Can funding change knowledge use?

There is widespread belief that meaningful interaction between scientists and practitioners, or co-production, increases use of scientific knowledge about sustainability and environmental change. Although funders are increasingly encouraging co-production, there have been few empirical studies assessing the outcomes of these efforts in shaping knowledge use. In this study, we systematically analyze research project reports (n = 120) and interview project participants (n = 40) funded by the U.S. National Estuarine Research Reserve System from 1998 to 2014 to support coastal management. Our analysis shows that escalating funding requirements for collaboration with users change research practice and strengthen connections between research outcomes and knowledge use. In consequence, a new model for science funding emerges, where sponsor, researcher, and user are more interactive with one another.     

Corporate concessions: Opportunity or liability for climate advocacy groups?

When social movements achieve some success in meeting goals, elite opponents may see compromise and collaboration with movement organizations as a desirable option. The consequences for advocacy organizations of elite concessions are contested. Some highlight the political opportunities created by elite support, such as increased access to financial resources, political processes, and new audiences. Others identify potential liabilities, including demobilization, bureaucratization, and the co-optation of advocacy frames. Herein is presented a framework for analyzing the pathways through which realignments among elite opponents influence social movement struggles, using the first fifteen years of the international climate negotiations as a historical case. After years of pressure from environmental advocacy organizations, some global oil corporations shifted their climate policy stance from obstruction to collaboration. These realignments in turn affected the activities, framing strategies, policy access, and cross-group relations of climate advocacy groups, benefiting some to the detriment of others.     

Who determines transformational change in development and climate finance?

The language of transformational change is increasingly applied to climate policy, and particularly in climate finance. Transformational change in this context is used with respect to low-carbon development futures, with the emphasis on mitigation and GHG metrics. But, for many developing countries, climate policy is embedded in a larger context of sustainable development objectives, defined through a national process. Viewed thus, there is a potential tension between mitigation-focused transformation and nationally driven sustainable development. We explore this tension in the context of operationalizing the Green Climate Fund (GCF), which has to deal with the fundamental tension between country ownership and transformational change. In relation to climate finance, acceptance of diverse interpretations of transformation are essential conditions for avoiding risk of transformational change becoming a conditionality on development. We further draw lessons from climate governance and the development aid literature. The article examines how in the case of both the Clean Development Mechanism and Nationally Appropriate Mitigation Actions, there has been limited success in achieving both development objectives and ‘nationally appropriate’ mitigation. The development aid literature points to process-based approaches as a possible alternative, but there are limitations to this approach.

Policy relevance

The concept of transformational change has gained prominence in climate finance. The conundrum facing the GCF is that it seeks to support transformational change in the climate realm, in a context where countries may have competing priorities. Balancing or even transcending this tension is a fundamental design challenge for the GCF. A primary focus on mitigation, particularly if metrics of performance are tied exclusively to GHG reduction, raise concerns about diluting ownership by recipient countries and evokes concerns of conditionality or worse. The literature on development assistance has explored options notably conditions on process and adequate capacity, and suggests that there are no short cuts to building domestic ownership. Actors on climate change need to avoid the risk that transformational change is perceived as, and becomes, an imposed condition. The risk that transformation change, operationalized in the context of unequal power relations, becomes an imposition on development, needs to be avoided.     

Win-win scenarios at the climate–development interface: Challenges and opportunities for stove replacement programs through carbon finance

Achieving win-win outcomes in environment–development programs is a laudable goal, but frequently difficult to realize. In this paper we review the possibilities for win-win climate and development outcomes in programs that distribute improved cookstoves with the use of carbon finance. We show that improved cookstove technologies form an important, if asymmetrical, environment–development interface, and illustrate the mutually supported local (development) and global (climate change) benefits of continued improved stoves use—where success in one program area is directly tied to benefits in the other. We also describe how program results are highly contextual and that, in practice, there are a number of challenges to achieving effective ‘win-win’ outcomes—including cultural, financial, governance and technological barriers. While carbon finance provides an opportunity to fund scaleable and enforceable stove programs, it may also introduce mutually supported impediments—where progress towards one set of program objectives, directly compromises progress towards other objectives. Drawing on development debates for improved cookstove use, scientific reports on stove-based greenhouse gas reductions, and preexisting case studies of carbon and non-carbon financed cookstoves in Peru, Uganda and Cambodia, we conclude that the challenge for future carbon financed improved cookstove projects will be to leverage inherent symbioses between climate and development arenas in order to overcome mutually supported impediments. Achieving substantive win-win conditions will require further scholarly and practical engagement to tackle the many outstanding challenges and uncertainties reviewed in this essay.     

Vulnerability and resilience: Coalescing or paralleling approaches for sustainability science?

Vulnerability and resilience constitute different but overlapping research themes embraced by sustainability science. As practiced within this science, the two research themes appear to coalesce around one of the foundational pivots of sustainability, the coupled human–environment system. They differ in regard to their attention to two other pivots, environmental services and the tradeoffs of these services with human outcomes. In this essay I briefly review the emergence of sustainability science and the three foundational pivots relevant to vulnerability and resilience. I outline the distinctions and similarities between the two research themes foremost as practiced within sustainability science and especially in regard to the attention given to the three pivots. I conclude with the observation that improvement in the capacity of vulnerability and resilience research to inform sustainability science may hinge on their linkages in addressing tradeoffs.