Abstract
This paper examines the ethical implications of the Clean Development Mechanism (CDM), the United Nation’s climate change initiative that provides incentives to countries and firms in developed countries to motivate investments in greenhouse gas reduction projects in developing countries. Using the tenets of agency theory, we present a solid waste management project in El Salvador as an illustrative example of how the CDM can produce a disproportionately high social cost for the most marginalized populations in the developing world. We suggest that the UN needs to reformulate the CDM so that it more effectively aligns the divergent goals of multiple actors and upholds the UN’s principles for sustainable development, including ethical firm-level behavior. By providing incentives for environmental, economic, and social value creation, the CDM would not only promote ethical norms for profit-seeking firms that participate in the program but also reinforce the UN’s twin pro-poor and environmental objectives.
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Notes
Annex I refers to a group of 41 industrialized and in-transition countries that signed the UN Framework Convention on Climate Change Convention; non-Annex I countries is comprised of 155 developing countries signatories to the Convention. (http://unfccc.int/parties_and_observers/items/2704.php).
The ownership structure of MIDES has changed over time. Salvadoran investors originally held a 10% stake; since 2006 they have had full ownership.
In 2010 MIDES was charging its client municipalities a tipping fee of between US$35 and $45/ton to dump their trash in the landfill (Ramirez 2012; Velasco 2011), up from about $11/ton in 2008 and $23 per ton in 2009 (El Diario de Hoy 2009b). We calculated 1,500 tons × $35 × 365 days = $19.2 million. Velasco reports that when the access road to the landfill is temporarily closed down because of community protests, MIDES suffers approximately US$65,000/day in lost revenues, or about $27 million/year (Velasco, 2011).
According to a 2009 report cofinanced by the European Commission (EuropeAid), MIDES’s residual claim to the CERs generated by the Nejapa project was 5% while Biothermica’s share was 95% (Mirkes, 2009).
Leachate, a toxic solution naturally produced from waste, can become a problem in improperly managed landfills (http://www.merriam-webster.com/dictionary/leachate).
MPGR (the initials for La Mesa Permanente para la Gestion de Riesgos en El Salvador) is a non-governmental organization comprised of a network of civil society organizations dedicated to protecting El Salvador’s most marginalized populations from the various risks that their living conditions generate (e.g., lack of clean drinking water).
One exception is that the Ministry of the Environment agreed in 2011 to pave one kilometer of the six-kilometer landfill access road (which is owned by MIDES).
0.20 milligrams/liter is considered an acceptable amount of lead; the Ayacachapa landfill presented levels of 39 mg/l.
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Martinez, C.A., Bowen, J.D. The Ethical Challenges of the UN’s Clean Development Mechanism. J Bus Ethics 117, 807–821 (2013). https://doi.org/10.1007/s10551-013-1720-4
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DOI: https://doi.org/10.1007/s10551-013-1720-4