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A Comparative Policy Analysis of the Clean Development Mechanism in South Africa and China

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There has been a general expectation that the emerging economies of South Africa and China, which are heavily dependent upon fossil fuels, could successfully leverage the potential of the Clean Development Mechanism (CDM). However, experience to date indicates that South Africa has significantly lagged behind China in the uptake of CDM, accounting for only 0.9 per cent of the worldwide registered annual Certified Emission Reductions (CERs), whereas China has dominated the market, generating 54 per cent of the annual worldwide CERs. This article provides a comparative analysis of the CDM experience in China and South Africa to identify the underlying drivers and obstacles to CDM in both countries. The analysis reveals that a strong industrial and energy policy in the host country plays a crucial role in the development of CDM. Our analysis indicates that policies which foster a low-carbon pathway encourage CDM uptake, rather than CDM driving a low-emission development pathway. In addition, the active engagement by key government and private sector stakeholders and the presence of a friendly business environment to uptake CDM significantly impact the utilization of the mechanism.