The sustainability of CDM projects

Abstract

This research applies both quantitative and qualitative methods to investigate the sustainable development (SD) benefits of the Clean Development Mechanism (CDM) projects. The results of cluster analysis confirm that the carbon market is separated into two sub-markets: a premium market; and a normal market or may be defined as “One CER Two Markets”. A willingness to pay study revealed that buyers are willing to pay a price premium of €1.12 per tonne of CO2e for carbon credits with high quality sustainability benefits. 56.4% of the buyers are willing to pay a price premium for Gold Standard carbon credits. The probability of the willingness to pay a price premium is affected positively by the four factors: (i) Buyer’s perception of the SD benefits; (ii) Buyer’s perception of return on investment (ROI); (iii) An involvement in CDM sustainability label; and (iv) Buyer’s attitude towards an importance of CDM sustainability labels. The CDM’s contribution to SD is explored in the context of a biomass (rice husk) case study conducted in Thailand. The results of Analytic Hierarchy Process (AHP) show that stakeholders ranked ‘increasing the usage of renewable energy’ as the most important SD benefit, whereas they considered air pollution problems associated with dust as the most significant social cost. Qualitative results, suggest that rice husk CDM projects contribute significantly to SD in terms of employment generation, an increase in usage of renewable energy, and transfer of knowledge. However, rice husk biomass projects create a potential negative impact on air quality. Finally, these results indicate that the results of a sustainability assessment conducted by host countries may be inadequate, suggesting an inability of host countries to ensure the sustainability of CDM projects. In order to ensure the environmental sustainability of CDM projects, stakeholders suggest that Thailand should cancel an Environmental Impact Assessment (EIA) exemption for CDM projects with an installed capacity below 10 MW and apply it to all CDM projects.