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.
Political differences between the North and the South over the framing of global climate change and sustainable development as an environmental or a development problem are reflected in the clean development mechanism's (CDM) double aim to achieve sustainable development (SD) in developing countries and cost-effective reduction of greenhouse gasses (GHGs) in developed countries. In Marrakech 2001 at the annual Conference of the Parties (COP-7) to the Climate Convention and the Kyoto Protocol, where the main part of the ‘rule book’ for operating the CDM was decided upon, the responsibility for achievement of SD was delegated from the international to the national level in host countries. Rather than setting international standards for SD, which developing countries argued would impinge on their sovereignty, designated national authorities (DNAs) in developing countries are mandated to issue a letter of approval (LoA) or reject CDM projects according to each country's own national SD criteria.
Since the COP-7, issues about the CDM's contribution to SD have not directly been addressed in international policy negotiations but have rather been repackaged and addressed more indirectly in debates such as programmatic CDM1 (Baron and Ellis, 2006; Bosi and Ellis, 2005; Bradley and Baumert, 2005; Figueres, 2005a and Figueres, 2005b; Sterk and Wittneben, 2005) and how to promote a more equitable distribution of CDM projects (Jung, 2006). In a recent review of the research literature on how the CDM contributes to SD, it was found that, left to market forces, the CDM does not significantly contribute to SD (Olsen, 2007). At the heart of the CDM's inability to achieve SD is the existence of trade-offs between carbon benefits valued in the carbon market and non-carbon benefits such as SD benefits that are not monetized in the carbon market (Kolshus et al., 2001; Sutter, 2003). To address the problem several researchers and policy actors have proposed an international standard for measuring and monitoring the CDM's sustainability contribution (Cosbey, 2006; Cosbey et al., 2005; Sutter and Parreño, 2007).
However, as yet no such methodology for sustainability assessment of all CDM projects at the global level exists. Furthermore, the potential merits and drawbacks of an international sustainability standard are contested. This article argues for the need of an international standard for sustainability assessment additional to national definitions. According to Article 12 of the Kyoto Protocol stating the twin objective of the CDM, the achievement of SD in developing countries is an equally important objective as reductions of GHGs. Hence, we argue that SD benefits should be ‘real’—even if they are not ‘measurable’—as GHG reductions are.
The article develops a new methodology for sustainability assessment of all CDM projects globally. Based on text analysis of 744 project design documents (PDDs) submitted for validation by 3 May 2006 the SD benefits of all the CDM projects are assessed. The findings describe how CDM projects at an aggregated level contribute to SD. As the nature of the methodology is qualitative there is no basis to conclude how much the CDM contributes to SD.
The article is structured to propose and illustrate the scope and limitations of a taxonomy for assessment of SD benefits as a way to address the problem of the CDM's poor performance with regard to achievement of SD in developing countries. First, weaknesses in the existing practices of how DNAs define and approve CDM projects’ sustainability contribution are identified. A taxonomy is developed and the findings of applying the taxonomy are presented. Policy implications are discussed and finally the article concludes that the taxonomy can be used as an international standard for qualitative sustainability assessment to support verification on whether or not potential SD benefits are actually realized.
The article has addressed the issue of the CDM's poor performance with regard to achievement of SD in developing countries by proposing and illustrating a taxonomy as an international standard for sustainability assessment of all CDM projects. The findings of the study contribute new knowledge on how CDM projects contribute to SD. CH4 reduction projects are found to have a high environmental profile and, contrary to expectations, they have a higher average number of SD benefits than renewable energy projects, which have a high socio-economic profile. Small-scale projects on average contribute a slightly higher number of SD benefits than large-scale projects and have a high socio-economic profile, whereas large-scale projects contribute with relatively more air quality, water, health and other benefits. The innovativeness of the taxonomy is to assess the sustainability of CDM projects in a simple, qualitative way and present findings at aggregated levels rather than at the project level. However, it remains an open question whether it is methodologically possible and politically desirable to introduce an international measure for the quantitative, absolute sustainability impact at the project level. The most important policy implication of the taxonomy is its contribution towards a new verification protocol to ensure that potential SD benefits of CDM projects are actually realized.
In relation to ongoing parallel discussions on a programmatic approach to increase the scope and SD contribution of the CDM by focusing on sector-wide policies and standards, the taxonomy is complementary. Though it uses the individual CDM project as its unit of analysis, there is a wide scope for analysis at aggregated levels. This can be used to monitor whether projects using the programmatic approach can accumulate the desired SD benefits to fulfil the vision of sector transformation towards SD.
