Carbon leakage from the clean development mechanism

Knut Einar Rosendahl and Jon Strand

Discussion Papers from Statistics Norway, Research Department

Abstract: The Clean Development Mechanism (CDM) is an offset mechanism designed to reduce the overall cost of implementing a given target for greenhouse gas (GHG) emissions in industrialized Annex B countries of the Kyoto Protocol, by shifting some of the emission reductions to Non-Annex B countries. This paper analyzes how CDM projects may lead to leakage of emissions elsewhere in Non-Annex B countries, taking into account also potential (negative) leakage effects from less emission reductions in Annex B. Leakage occurs because emissions reductions under a CDM project may affect market equilibrium in regional and/or global energy and product markets, and thereby increase emissions elsewhere. We find that overall leakage typically will be positive and sizeable, thus leading to an overall increase in global GHG emissions when CDM projects are undertaken. The leakage rate is greatest when the different fossil fuel markets are more segregated.

Keywords: Carbon leakage; Clean Development Mechanism; Kyoto protocol (search for similar items in EconPapers)
JEL-codes: F18 H23 Q41 Q54 (search for similar items in EconPapers)
Date: 2009-09
New Economics Papers: this item is included in nep-ene, nep-env and nep-ppm
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Carbon Leakage from the Clean Development Mechanism (2011)
Journal Article: Carbon Leakage from the Clean Development Mechanism (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ssb:dispap:591

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