The Clean Development Mechanism and low carbon development: A panel data analysis

The Clean Development Mechanism (CDM) of Kyoto Protocol, designed for the industrialized countries to earn emission credits by investing in greenhouse gas (GHG) emission reduction projects in developing countries, shall contribute to emission reductions and sustainable development in the host countries. However, whether the CDM is achieving its dual goals has been questionable. This research empirically investigates the long-run impacts of CDM projects on CO2 emission reductions for 80 eligible CDM host countries over 1993-2009. By allowing for considerable heterogeneity across countries, this research provides evidence in support of a decline in CO2 emissions associated with CDM projects. It serves to encourage developing countries to effectively develop CDM projects towards low carbon development.

► This research empirically investigates whether CDM projects registered lead to CO2 emission reductions in the host countries. ► It carries out a dynamic panel data analysis based on 80 eligible CDM host countries over 1993-2009. ► It provides evidence in support of CO2 emission reductions of CDM projects, adding to the growing debates on this topic. ► It serves to encourage developing countries to effectively develop CDM projects towards low carbon development.