Is the Clean Development Mechanism effective for emission reductions?
The UNFCCC COP 17 Durban conference confirmed the need to reach an all-party-inclusive global climate agreement by 2015 as the successor of the Kyoto Protocol. Although this Durban ‘road map’ is promising, the international negotiation process for reaching such a deal is bound to be filled with great challenges, given the wide divide between developed and developing nations. Against this background, comprehensive evaluations of the effectiveness of Kyoto market-based mechanisms such as the Clean Development Mechanism (CDM) in terms of mitigating human-induced climate change are urgently needed. Such information is required to assess how the world's collective actions against climate change should proceed after Kyoto. This paper studies whether CDM is achieving its objective of emission reductions in the host countries. Here we empirically investigate the impacts of CDM projects on CO2 emission reductions for 60 CDM host countries over the period 2005–2010, using a newly developed econometric method for dynamic panel data models associated with the X-differencing procedure. Our results provide evidence in support of a decline in CO2 emissions in CDM host countries. We conclude that the international community should continue its support towards low carbon development in developing countries via CDM projects.