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Cashing in on Kyoto: the implications of emission offset regimes on Indonesia and other developing countries

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F. Jotzo
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The 1997 Kyoto Protocol requires industrialised countries to limit their greenhouse gas emissions as well as to enhance the 'sinks' of these gases. One of the unique characteristics of the Kyoto Protocol is the provision for carbon emissions offset mechanisms, where countries can trade their emissions permits internationally.The Clean Development Mechanism (CDM) is the only mechanism that can include developing countries. Using a quantitative model developed specifically for policy issues in the implementation of the Kyoto Protocol, this paper analyses the implications of including sink projects under the CDM.The paper finds that:including sink projects in order to increase the volume of the CDM may be a fallacy - the increase in low-cost sink projects leads to a fall in the price paid for emission credits, which can outweigh the quantity gains, and lead to lower revenue and lower financial gains for developing countriesequity between countries and regions may be enhanced by the inclusion of sinksin Indonesia emission offset opportunities in the energy sector are concentrated in Java, while forestry projects take place in the provincesLatin America has relatively little potential for emission offsets in the energy sector, but presents large opportunities for forestry projects. [adapted from author]