This background note assesses the options available to developing countries in terms of GHG emission reductions. It begins by discussing the emissions reductions mechanisms included within the Kyoto Protocol and the ways in which they can contribute to ‘green growth’ – economic growth with reduced or neutral greenhouse gas (GHG) emisssions.
A brief overview of emissions traded through the Clean Development Mechanism (CDM) is followed by an analysis of the geographical distribution of CDM projects and types. It also explores the market and volume of transactions of this mechanism and why it has been so successful in some countries such as India and China. The authors then explore the EU pressure for stating a new set of targets in the second KP commitment period before discussing how, under the worst case scenario, a failure in agreeing emission targets may eliminate the need for carbon offsetting and the CDM.
The document recommends that the opportunities for developing countries to benefit from the 2012 climate change regime could potentially be much enhanced as a result of the following:
the inclusion of reduced emissions from deforestation and degradation projects (REDD) within the CDM
a greater emphasis on programmatic CDM which may enable more developing countries to benefit from the CDM
the inclusion of larger players such as the USA which could have a dramatic impact on the emissions trading market, and the CDM
the inclusion of the adaptation fund levied at 2% of all CDM transactions which would enhance the ability of some developing countries to achieve ‘green growth’ by tapping into carbon markets.