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Carbon offsets with endogenous environmental policy, Volume 1
Author:Strand, Jon; Country:World;
Date Stored:2010/05/07Document Date:2010/05/01
Document Type:Policy Research Working PaperSubTopics:Energy Production and Transportation; Environmental Economics & Policies; Environment and Energy Efficiency; Climate Change Mitigation and Green House Gases; Climate Change Economics
Language:EnglishMajor Sector:Energy and mining
Rel. Proj ID:1W-Climate Change Mitigation -- -- P117259;Region:The World Region
Report Number:WPS5296Sub Sectors:General energy sector
Collection Title:Policy Research working paper ; no. WPS 5296Volume No:1

Summary: Interests in obtaining carbon offsets in host countries for Clean Development Mechanism projects may serve as an obstacle to implementing more stringent general environmental policies in the same countries. A relatively lax environmental policy, whereby carbon emissions remain high, can be advantageous for such countries as it leaves them with a higher than otherwise scope for future emissions reductions through Clean Development Mechanism and other offset projects. In this note, the potential to affect the availability of future Clean Development Mechanism projects is shown to distort environmental and energy policies of Clean Development Mechanism host countries in two ways. Measures to reduce use of fossil energy are weakened. Because this weakens private sector incentives to switch to lower-carbon technology through Clean Development Mechanism projects, host governments then also find it attractive to subsidize this switch, in order to maximize the country’s advantage from the Clean Development Mechanism.

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