Narrow Results

The 1992 Climate Change Convention aims to stabilise greenhouse gas (GHG) emissions. Joint Implementation (JI) and the Clean Development Mechanism (CDM) are instruments which allow countries with high marginal costs of abatement to participate in emission reduction projects in countries with lower marginal abatement costs with the incentive of gaining carbon credits for the reduction of GHGs. The environmental benefits sought by the Convention relate mainly to he mitigation of climate change. However, consideration should also be given to other potential environmental, economic and social effects of JI/CDM projects on the local population and host country. This paper discusses the need for integrating environmental and social considerations into the JI/CDM process. It undertakes a preliminary retrospective environmental assessment of AIJ energy projects in the Czech Republic and Estonia. It also proposes support for capacity building and data collection systems in host countries, application of a simple participative scoping exercise for all projects followed by further work as necessary, upgrading of the Uniform Reporting Format for projects, and incorporation into project approval criteria.

Without effective developing country (DC) participation in climate mitigation, it will be impossible to meet global concentration and climate change targets. However, DCS are unwilling and, in many cases, unable to bear the mitigation cost alone. They need huge transfers of resources — financial, knowledge, technology and capability — from industrialized countries (ICs). In this paper, we evaluate instruments that can induce such resource transfers, including tradable credits, mitigation funds and results-based agreements. We identify key constraints that affect the efficiency and political potential of different instruments, including two-sided private information leading to adverse selection; moral hazard and challenging negotiations; incomplete contracts leading to under-investment; and high levels of uncertainty about emissions paths and mitigation potential. We consider evidence on the poor performance of current approaches to funding DC mitigation — primarily purchasing offsets through the Clean Development Mechanism — and explore to what extent other approaches can address problems with offsets. We emphasize the wide spectrum of situations in DCS and suggest that solutions also need to be differentiated and that no one policy will suffice: some policies will be complements, while others are substitutes. We conclude by identifying research needs and proposing a straw man to broaden the range of "contracting" options considered.

Developing countries are struggling for finding resources to finance their adaptation to or mitigation of the effects of climate change. In that spirit, the Copenhagen summit, the fifteenth Conference of Parties (COP15) can be seen as a success since it ended with an important promise of creation of a common fund of $US 100 billions per year over the period 2013–2020 to help poor and emerging countries to support adoption of costly but eco-friendly technologies. However, implementation of former instruments shows mixed results. In this paper, we show that transaction costs effect dominates asymmetric information effect in impeding some developing countries to benefit from the clean development mechanism, one of the instruments of the implementation of the Kyoto Protocol. Thus environmental instruments may be useless if they are not supplemented by policies to reduce transaction costs in the host countries.