Instruments for Climate Policy

Instruments for Climate Policy

Limited versus Unlimited Flexibility

New Horizons in Environmental Economics series

Edited by Johan Albrecht

Instruments for Climate Policy focuses on economic and political aspects related to the recent proposals and the debate on limits in flexibility, and discusses EU and US perspectives on climate policy instruments and strategies. This is followed by chapters on economic efficiency and the use of flexible instruments as well as contributions to the debate on ‘when flexibility’, on the arguments behind the EU ceilings proposal and on voluntary approaches to climate policy. One of the main conclusions reached with respect to proposals for limiting flexibility is the need to evaluate simultaneously their economic, ecological and international political consequences. The authors include both important policymakers and leading academics in the area.

Chapter 9: The clean development mechanism: potential, promise and limitations

Jyoti P. Painuly

Subjects: economics and finance, environmental economics, environment, climate change, environmental economics


9. The clean development mechanism: potential, promise and limitations Jyoti P. Painuly INTRODUCTION The Kyoto Protocol has been extensively analysed by various experts, but mostly for its impact on developed countries. Of the three mechanisms proposed by the Protocol to provide flexibility and reduce costs in meeting the Annex B1 greenhouse gas (GHG) emissions targets, only the clean development mechanism (CDM) is of common interest to both Annex B and non-Annex B countries. The other two, that is emissions trading (ET) and joint implementation (JI) allow only Annex B participation, although these may also affect non-Annex B countries through their impact on price and supply of GHG credits. The non-Annex B countries’ approach to the CDM has been one of caution, and there is a perceptible lack of initiative from the countries that have major potential for the CDM. The full implications of the CDM are yet not clear and the issues raised by developing countries in various forums include the need for clarity and simplicity in definition of additionality, project eligibility and sustainable development criteria, geographic distribution of the CDM projects, supplementarity, capacity building and so on. The Kyoto Protocol completed three years of its existence in December 2000. It is yet to be ratified, putting a question mark over the determination of the international community to take concrete action on the issue of climate change. One of the major stumbling blocks in this has been the reluctance of the USA to ratify the Protocol and call...

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