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.