Local Actions, Global Impacts: International Cooperation and the CDM

Ariel Dinar, Shaikh Mahfuzur Rahman, Donald Larson () and Philippe Ambrosi
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Ariel Dinar: Ariel Dinar is Professor of Environmental Economics and Policy and the Director of Water Science and Policy Center at the Department of Environmental Sciences, University of California, Riverside, USA. He teaches, conducts research and publishes on water economics, economics of climate change, strategic behavior and the environment, and regional cooperation over natural resources.
Shaikh Mahfuzur Rahman: Shaikh M. Rahman is an Assistant Professor of Agricultural and Applied Economics at Texas Tech University, Lubbock, Texas. His research focuses on various fields of applied microeconomics including economics of climate change with special emphasis on the Kyoto Protocol, industrial organization of US agriculture, and the interface of agricultural production and climate change.
Philippe Ambrosi: Philippe Ambrosi is an Economist with the World Bank Carbon Finance Unit. He works on economics and regulatory aspects of carbon markets and co-authors the annual report State and Trends of the Carbon Market. He is also involved in analyses of carbon markets in individual states such as India and Brazil.

Global Environmental Politics, 2011, vol. 11, issue 4, 108-133

Abstract: We examine the Clean Development Mechanism (CDM) market as form of cooperative involvement between developing-host and developed-investor countries, likely to evolve into a form of Foreign Direct Investment (FDI) with opportunities for further collaboration. We use three variables to measure the level of cooperation, namely number of joint CDM projects, volume of CO_2 abatement realized from the CDM projects, and volume of investment in the CDM projects. We rely on international economics and international relations literature to suggest that the levels of economic development and institutional development, energy structures of the economies, country vulnerability to various climate change effects, political constraints, trade, and historic relations between the host and investor countries are good predictors of the level of cooperation in CDM projects. The main policy relevant conclusions include the importance of simplifying the CDM project regulation/clearance cycle as an essential policy option for further growth of joint CDM projects; improving governance structures in the host and investor countries that would lead to higher political stability and trust between the countries for business, including CDM; and strengthening trade or other long-term economic activities that connect the countries for fostering CDM cooperation. © 2011 by the Massachusetts Institute of Technology.

Date: 2011
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