Macroeconomic impacts of the CDM: the role of investment barriers and regulations

Niels Anger, Christoph Böhringer and Ulf Moslener

Climate Policy, 2007, vol. 7, issue 6, 500-517

Abstract: This paper quantifies the macroeconomic impacts of the Kyoto Protocol's Clean Development Mechanism (CDM) employing a computable general equilibrium model of international trade and energy use. We incorporate project-based CDM supply data in order to assess the relative importance of transaction costs and investment risks, as well as CDM regulations through supplementarity and additionality criteria. The numerical results show that the macroeconomic impacts of transaction costs and investment risks are negligible. Given the large supply of cheap project-based emissions abatement in developing countries, compliance with 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.

Date: 2007
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DOI: 10.1080/14693062.2007.9685673

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