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The Clean Development Mechanism: an assessment of current practice and future approaches for policy

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E. Boyd
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This paper provides an analysis of the Clean Development Mechanism (CDM) highlighting current practices and future directions that need to be at taken to strengthen policy. The CDM was established by the Kyoto Protocol, so that reductions in emissions could occur where they are more economically efficient. Although poor nations are exempt from the Protocol’s binding limits, they are able to participate in the global project of emissions reductions by hosting projects under the Protocol’s Clean Development Mechanism, or CDM.The document explains that CDM enables developing nations to participate in the treaty by selling emissions credits, termed “certified emissions reductions” (CERs), to parties with commitments to reduce their greenhouse gases. The CDM is a project-based approach to reduce emissions, where new credits are continuously being created as new projects are approved. Key findings in this report show that:

the CDM has shown to be effective as a new market mechanism in its aim to achieve cost effective emissions reductions in developing countries
the CDM has fallen short of contributing to sustainable development. There is an uneven geographical distribution of projects and dominance in certain sectors
one of the key challenges for the future of the CDM is how to illustrate to civil society that participation of local stakeholders in the CDM is possible and that sustainable development criteria at the government level will lead to social development benefits that will outweigh social costs
in discussing the future of the CDM, policy makers will have to consider the wider contributions of the CDM to development, and ways to offer additional incentives to develop a minimum percentage of CDM projects in Africa.
alternative options for systematically addressing sustainable development benefits in the CDM are presented. The most likely scenario is one that falls in between “not doing anything” to “politically favouring” CERs which ensure high sustainable development projects.