Is the Clean Development Mechanism delivering benefits to the poorest communities in the developing world? A critical evaluation and proposals for reform

Abstract

This paper explores whether the Clean Development Mechanism (CDM), a flexibility mechanism under the Kyoto Protocol, has contributed to poverty alleviation in countries that host CDM projects. We argue that the CDM should deliver pro-poor benefits to the communities in which projects are established, since poverty alleviation is integral to sustainable development, which is one of the main purposes of the CDM. After briefly discussing the background of the CDM, we discuss assessment difficulties to which research is prone when evaluating CDM projects for alleged sustainable development contributions. Section 4 brings together and analyses available empirical research on the pro-poor benefits the CDM purportedly delivers to host country communities, concluding that the CDM has failed to deliver poverty alleviation. Therefore, without attempting to be exhaustive, we suggest policy reforms that aim to redirect the CDM to those most in need of assistance.

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Notes

  1. 1.

    As of 14 February 2015.

  2. 2.

    For an instructive overview of SD criteria applied by the three largest CDM host countries, see Olsen and Fenhann (2008: 2821).

  3. 3.

    This problem may be avoidable by implementing add-on standards, such as the Gold Standard. However, only a minority of current CDM projects has a premium add-on standard (Crowe 2013). In Sect. 5, we will therefore argue that the implementation of premium add-on standards should be strengthened by a tax or discount rate to discriminate between CERs with or without add-on standards.

  4. 4.

    It is worth noting that the credits that result from offsetting through the CDM are an estimation. The owner of a project in a low-emitting country compares the estimated hypothetical baseline of existing emissions with the predicted emissions from the completed project. Carbon accountants calculate what the emission rates would have been if no investment had taken place. This process of determining the so-called additionality of a project is highly questionable (Haya 2009; Schneider 2011).

  5. 5.

    However, when considering SD benefits Olsen and Fenhann (2008) conclude that on the basis of an evaluation of PDDs, the project type is more significant than the differences between small- and large-scale projects.

  6. 6.

    In contrast, Casillas and Kammen (2010) show that renewable energy from biogas and wind turbines as well as measures to increase energy efficiency in communities that rely on diesel-powered electricity generation can be delivered at a negative cost. Contrary to popular opinion, they convincingly argue that mitigating climate change, increasing energy access and alleviating rural poverty can all be complementary, and can be done in cost-effective manners.

  7. 7.

    This is but one criterion for emissions trading to be morally acceptable. Elsewhere, we have argued that in order to comply with justice demands, emissions trading should be effective in reducing emissions and should distribute the burdens associated with mitigation activities equitably (Peeters et al. 2013).

  8. 8.

    The Gold Standard, for example, was established in 2003 by a consortium of NGOs. The Gold Standard employs three ‘screens’: only renewable energy and energy efficient projects qualify for registration; the Gold Standard applies a conservative assessment of projects’ additionality; every eligible project has to submit a ‘sustainability matrix’, i.e. a checklist approach through which a project developer needs to state what impacts the project will have on environmental, social and economic indicators (Drupp 2011; Wood 2011). To obtain the Gold Standard, project developers need to answer eleven question concerning human development issues. These questions cover human rights, resettlement, removal of cultural heritage, freedom of association, compulsory labour, child labour, discrimination, healthy work environment, precautionary approach as regards to environmental challenges, degradation of critical natural habitats and corruption (Sterk et al. 2009: 7). In addition, project developers submit a sustainability-monitoring plan that is used to verify ex post whether the project has indeed contributed to SD as assessed ex ante (Sterk et al. 2009: 16). Research indicates that projects certified with the Gold Standard generally capture greater SD benefits than unlabelled CDM projects (i.e. projects without add-on standards) (Killick 2012: 21). See also CDMGS (2015).

  9. 9.

    Tobin’s original tax proposal taxes the conversion of one currency into another, dissuading short-term currency transactions.

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Acknowledgments

The authors would like to thank Julian Cockbain and Peter Tom Jones

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Dirix, J., Peeters, W. & Sterckx, S. Is the Clean Development Mechanism delivering benefits to the poorest communities in the developing world? A critical evaluation and proposals for reform. Environ Dev Sustain 18, 839–855 (2016). https://doi.org/10.1007/s10668-015-9680-8

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Keywords

  • Climate change
  • Clean Development Mechanism
  • Sustainability
  • Poverty