The Cost Structure of the Clean Development Mechanism

This paper examines the cost of producing emission reduction credits under the Clean Development Mechanism. Using project-specific data, cost functions are estimated using alternative functional forms. The results show that, in general, the distribution of projects in the pipeline does not correspond exclusively to the cost of generating anticipated credits. Rather, investment choices appear to be influenced by location and project type considerations in a way that is consistent with variable transaction costs and investor preferences among hosts and classes of projects. This implies that comparative advantage based on the marginal cost of abatement is only one of several factors driving Clean Development Mechanism investments. This is significant since much of the conceptual and applied numerical literature concerning greenhouse gas mitigation policies relies on presumptions about relative abatement costs. The authors also find that Clean Development Mechanism projects generally exhibit constant or increasing returns to scale. In contrast, they find variations among classes of projects concerning economies of time.

Bibliographic Details

Main Authors:	Rahman, Shaikh M., Larson, Donald F., Dinar, Ariel
Language:	English en_US
Published:	World Bank, Washington, DC 2012-11
Subjects:	ABATEMENT COSTS, ABATEMENT TECHNOLOGY, AFFORESTATION, AGGREGATE LEVEL, AIR, AIR POLLUTION, ALTERNATIVE METHODS, AMOUNT OF EMISSIONS, ANIMAL WASTE, ANTHROPOGENIC GREENHOUSE, ANTHROPOGENIC GREENHOUSE GAS, APPROACH, ATMOSPHERE, BASELINE EMISSIONS, BIOGAS, CALCULATION, CAPITAL COST, CAPITAL COST DATA, CAPITAL COSTS, CAPITAL INVESTMENT, CAPITAL INVESTMENTS, CARBON, CARBON CAP, CARBON DIOXIDE, CARBON EMISSIONS, CARBON MARKET, CEMENT, CERTIFIED EMISSION REDUCTION, CLIMATE, CLIMATE CHANGE, CLIMATE CHANGE MITIGATION, CLIMATIC CHANGE, CO2, COAL, COAL MINE, COST OF PRODUCTION, COSTS OF ABATEMENT, DEVELOPMENT ECONOMICS, DISCOUNT FACTOR, DRIVING, ECOLOGICAL ECONOMICS, ECONOMICS OF CLIMATE CHANGE, ECONOMIES OF SCALE, ELASTICITIES, ELASTICITY, ELECTRIC POWER, ELECTRICITY, ELECTRICITY GENERATING, ELECTRICITY GENERATION, ELECTRICITY GENERATION CAPACITY, ELECTRICITY PRICES, ELECTRICITY PRICING, ELECTRICITY SALES, ELECTRICITY TARIFF, ELECTRICITY TARIFFS, EMISSION ABATEMENT, EMISSION CONTROL, EMISSION PERMITS, EMISSION RATES, EMISSION REDUCTION, EMISSION REDUCTION CREDIT, EMISSION REDUCTION TARGETS, EMISSION TRADING, EMISSIONS, EMISSIONS ABATEMENT, EMISSIONS REDUCTION, EMISSIONS REDUCTIONS, ENERGY EFFICIENCY, ENVIRONMENTAL ECONOMICS, ENVIRONMENTAL REGULATION, FIXED COSTS, FOREST, FORESTRY, FORESTRY PROJECTS, FOSSIL, FOSSIL FUEL, FRAMEWORK CONVENTION ON CLIMATE CHANGE, FUEL SWITCHING, GENERATING CAPACITY, GENERATION CAPACITY, GHG, GHGS, GREENHOUSE, GREENHOUSE GAS, GREENHOUSE GAS ABATEMENT, GREENHOUSE GAS EMISSIONS, GREENHOUSE GAS MITIGATION, GREENHOUSE GASES, HFCS, HOURS OF OPERATION, INTEREST RATE, INTERNATIONAL ENERGY AGENCY, INVESTMENT DECISIONS, LAND ECONOMICS, LANDFILL, LANDFILL GAS, LEVELS OF EMISSIONS, LOWER COSTS, MARGINAL ABATEMENT, MARGINAL ABATEMENT COST, MARGINAL COST, MARGINAL COST OF ABATEMENT, METHANE, MITIGATION POTENTIAL, N2O, NET COST, NITROGEN, NITROUS OXIDE, NUCLEAR ENERGY, PFCS, PIPELINE, POLICY IMPLICATIONS, POLLUTANTS, POLLUTION LEVELS, POLLUTION LOAD, PORTFOLIO, POWER GENERATION, POWER GENERATION CAPACITY, POWER SECTOR, PRESENT COST, PRESENT VALUE, RENEWABLE ENERGY, RENEWABLE ENERGY PROJECTS, RENEWABLE RESOURCE, RESOURCE ECONOMICS, SO2, SOLAR POWER, SUBSTITUTION, SULFUR, SULFUR EMISSIONS, SUPPLY SIDE, SUSTAINABLE DEVELOPMENT, TOTAL COST, TOTAL COSTS, TOTAL EMISSIONS, TRADABLE EMISSION, TRANSACTION COSTS, TRANSPORT, TRANSPORT PROJECTS, TRANSPORTATION, TRANSPORTATION PROJECTS, TRUE, UNCERTAINTIES, UNEP, VARIABLE COST, WASTEWATER TREATMENT, WATER POLLUTION, WATER QUALITY, WATER TREATMENT, WIND, WIND FARM,
Online Access:	http://documents.worldbank.org/curated/en/2012/11/16952290/cost-structure-clean-development-mechanism https://hdl.handle.net/10986/19929
Tags:	Add Tag No Tags, Be the first to tag this record!