Options for Reforming the Clean Development Mechanism

Summary

The Clean Development Mechanism (CDM)—established by the Kyoto Protocol of the U.N. Framework Convention on Climate Change—is an emissions offset program that allows industrialized countries to receive credits for funding emissions reduction projects in developing countries. The program is intended to provide a cost-effective way for industrialized countries to reduce greenhouse gas emissions, while at the same time supporting sustainable development in developing countries. However, the CDM has been criticized for its lengthy and expensive project approval procedures, its exclusion of many categories of potentially important mitigation activities, and its methodologies for calculating whether projects actually reduce greenhouse gas emissions. In response to these problems, this Issue Brief presents a variety of options for reforming the CDM. These options include:

(1) encouraging industrialized countries to use CDM offsets to cover a larger share of their emissions reduction commitments than they currently do;

(2) changing the criteria for CDM credits to include a broader set of policies that “create real progress” towards climate goals;

(3) creating an international fund that is authorized to sell credits up front and then use the proceeds to make investments in mitigation and adaptation projects in developing countries;

(4) making technology transfer the emissions-reducing activity for which credits are awarded;

(5) allowing developing countries that decide to accept an economy-wide emissions cap to keep their existing CDM credits; and

(6) using the CDM to encourage developing countries to join an international climate agreement.