The European Journal of Development Research

, Volume 26, Issue 1, pp 142–159 | Cite as

Financing the Clean Development Mechanism through Debt-for-Efficiency Swaps? Case Study Evidence from a Uruguayan Wind Farm Project

  • Danny CassimonEmail author
  • Martin Prowse
  • Dennis Essers
Original Article


As one of Kyoto’s three flexibility mechanisms, the Clean Development Mechanism (CDM) allows the issuance of Certified Emission Reduction credits from offset projects in non-Annex I countries. As little attention has been paid to how CDM projects are financed, this article assesses whether offset schemes with public bodies should utilise debt swaps as a form of funding. Specifically, we examine whether a debt-for-efficiency swap between Uruguay and Spain within a wind power project increased project finance and generated greater development co-benefits. We assess the transaction using a simple evaluative framework: whether it delivered additional resources to the debtor country and/or government budget; whether it delivered more resources for climate change mitigation; whether it had a sizeable effect on overall debt burdens (creating ‘indirect’ benefits); and whether it aligned with government policy and systems (elements of the new aid approach). We find evidence that cautions against using the Spanish–Uruguayan case as a model for future debt-for-efficiency swaps.


clean development mechanism debt swaps climate finance Uruguay Spain 


Parmi les trois mécanismes de flexibilité du Protocole de Kyoto, le Mécanisme de Développement Propre (MDP) permet la diffusion des crédits de carbone provenant des projets compensatoires dans des pays non-Annexe I. Manque de réflexion sur les modes de financement des projets MDP, cet article vise à évaluer l’utilisation, par des bailleurs de fonds officiels comme intervention d’aide publique au développement, des opérations de conversion de la dette officielle comme mode de financement utile. Plus particulièrement, nous examinons dans quel mesure une opération de conversion de dette au bénéfice des économies d’énergie entre l’Uruguay et l’Espagne dans le secteur d’énergie éolienne, inclue dans un projet MDP, a bénéficié au financement du projet et à la disponibilité des ressources additionnelles pour le pays débiteur et pour la mitigation climatique, a créé des avantages complémentaires sur le plan du développement, et s’inscrit dans la nouvelle approche « d’alignement » de l’aide au développement aux politiques et systèmes du pays récepteur. Nos résultats mettent en garde contre l’adoption du cas espagnol-uruguayen comme modèle exemplaire pour des opérations futures de conversion de dette au bénéfice des énergies propres dans le cadre MDP.



An earlier draft version of this article was presented at the 2011 EADI/DSA joint Conference on Rethinking Development in an Age of Scarcity and Uncertainty at the University of York. The authors wish to thank Ana de Vicente Lancho of the Spanish Ministry of Economy and Finance and Roberto Aiello of the World Bank Carbon Finance Unit for providing useful documentation on the debt swap agreement under consideration here. Helpful comments and suggestions of two anonymous referees are also gratefully acknowledged. The opinions expressed in this article, as well as any remaining errors, are those of the authors only.


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Copyright information

© European Association of Development Research and Training Institutes 2013

Authors and Affiliations

  1. 1.Institute of Development Policy and Management (IOB), University of AntwerpAntwerpBelgium
  2. 2.Department of Geosciences and Natural Resource ManagementUniversity of CopenhagenCopenhagenDenmark

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