 Clean development mechanism projects and portfolio risksRyuji Matsuhashi, Sei Fujisawa, Wataru Mitamura, Yutaka Momobayashi and Yoshikuni Yoshida Energy, 2004, vol. 29, issue 9, 1579-1588 Abstract: Clean development mechanism (CDM) is expected to facilitate technology transfer from developed to developing countries as well as to economically reduce greenhouse gas emissions. In this article, we explore effective institutions to activate CDM projects. For this purpose, we have estimated internal rate of return (IRR) and other indicators on profitability for 42 CDM or JI projects, taking account of volatilities in the price of certified emission reductions (CER). As a result of Monte Carlo simulations, expected values and standard deviations in the IRR of the projects were quantitatively shown. Then we evaluated various risks in CDM, concluding that diversification of investment is an effective way to suppress these risks. Therefore securitization of CDM finance is proposed as a means of facilitating the diversification of investment. Namely, we present the concept of a CDM bond, which is a project bond with CER. We also investigated the role of governments to suppress risks in CDM. Referring to CERUPT, initiated by the Netherlands’ government, the institution of “insured CERUPT” is proposed to suppress downside risks in the IRR of the projects. We concluded that it is possible to make CDM projects viable by the “insured CERUPT” and CDM bond. Date: 2004 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:29:y:2004:i:9:p:1579-1588 DOI: 10.1016/j.energy.2004.03.060 Access Statistics for this article Energy is currently edited by Henrik Lund and Mark J. Kaiser More articles in Energy from Elsevier |
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