Macroeconomic Impacts of the Clean Development Mechanism: The Role of Investment Barriers and Regulations

Niels Anger, Christoph Böhringer and Ulf Moslener

No 07-026, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: This paper quantifies the macroeconomic impacts of the Clean Development Mechanism (CDM) under the Kyoto Protocol based on a computable general equilibrium (CGE) model of international trade and energy use. Employing project-based CDM supply data we assess the relative importance of transaction costs and investment risks as well as CDM regulations through supplementarity and additionality criteria. Our numerical results show that the macroeconomic impacts of transaction costs and investment risks are negligible: Given the large supply of cheap project-based emissions credits in developing countries, compliance to the Kyoto Protocol can be achieved at a very low cost. However, regulatory restrictions such as a supplementarity criterion can substantially curtail the potential efficiency gains from where-flexibility in climate policy.

Keywords: Kyoto Protocol; Emissions Trading; Clean Development Mechanism; Computable General Equilibrium (search for similar items in EconPapers)
JEL-codes: C68 D61 Q56 Q58 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-cmp, nep-ene, nep-env, nep-ppm and nep-reg
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:5589

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