Sustainable development benefits of clean development mechanism projects: A new methodology for sustainability assessment based on text analysis of the project design documents submitted for validation

The clean development mechanism (CDM) is part of the global carbon market developing rapidly in response to global warming. It has the twin objective to achieve sustainable development (SD) in host countries and assist Annex-1 countries in achieving their emission reduction targets in a cost-efficient manner. However, research has shown that trade-offs between the two objectives exist in favour of cost-efficient emission reductions and that left to the market forces, the CDM does not significantly contribute to sustainable development. The main argument of the paper is the need for an international standard for sustainability assessment—additional to national definitions—to counter weaknesses in the existing system of sustainability approval by designated national authorities in host countries. The article develops a new methodology, i.e. a taxonomy for sustainability assessment based on text analysis of the 744 project design documents (PDDs) submitted for validation by 3 May 2006. Through analysis of the SD benefits of all CDM projects at aggregated levels, the strengths and limitations of the taxonomy are explored. The main policy implication of the research is to propose the taxonomy as the basis of an international verification protocol for designated operational entities (DOEs) for reporting, monitoring and verifying that potential SD benefits described in the PDDs are actually realized.