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The cost structure of the clean development mechanism, Volume 1
 
Author:Rahman, Shaikh M.; Larson, Donald F.; Dinar, Ariel; Country:World;
Date Stored:2012/11/13Document Date:2012/11/01
Document Type:Policy Research Working PaperSubTopics:Energy Production and Transportation; Transport Economics Policy & Planning; Climate Change Economics; Climate Change Mitigation and Green House Gases; Energy and Environment
Language:EnglishMajor Sector:Energy and mining
Rel. Proj ID:1W-Markets For Environmental Resources -- -- P081180;Region:The World Region
Report Number:WPS6262Sub Sectors:General energy sector
Collection Title:Policy Research working paper ; no. WPS 6262Paper is funded by the Knowledge for Change Program (KCP)TF No/Name:BBRSB-BB RESEARCH SUPPORT BUDGET; TF094624-KCP II - INVESTIGATING THE ROLE OF THE CLEAN DEVELOPMENT MECHANISM IN C
Volume No:1  

Summary: 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.

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