European Journal of Law and Economics

, Volume 40, Issue 2, pp 367–391 | Cite as

The design flaw of the displacement principle of clean development mechanism: the neglect of electricity shortage

  • Jinshan Zhu
  • Yingkai TangEmail author


This study addresses a methodology flaw of Kyoto Protocol’s Clean Development Mechanism (CDM) that neglects the wide-spread electricity shortage in the developing countries. The impact of this neglect is huge: about half of the annual carbon credits from the projects registered by 2010 are from the on-grid electricity displacement projects, and the majority of them had concentrated in several countries where electricity shortage remains severe and lasting. In the context of widespread energy shortage, the extra electricity produced by the CDM projects is more likely to be used to provide extra electricity supply rather than substitute the Business-as-usual (BAU) electricity supply. Hence, the neglect of the wide-spread energy shortage in the CDM methods puts the integrity of a critical amount of the CDM carbon credit in question.


Carbon credits Carbon emissions trading Clean development mechanism (CDM) 

JEL classification

Q54 K32 K33 


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Copyright information

© Springer Science+Business Media New York 2012

Authors and Affiliations

  1. 1.IEL, International Programme in Institutions, Economics and LawMoncalieriItaly
  2. 2.Law SchoolCornell UniversityIthacaUSA
  3. 3.Business SchoolSichuan UniversityChengduChina

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