THE IMPACT OF CER DISCOUNTING ON THE COMPETITIVENESS OF DIFFERENT CDM HOST COUNTRIES

The paper investigates the potential of CER discounting to address CDM shortcomings, such as non-additionality and the uneven distribution of projects. By analyzing abatement cost curves for China, India, advanced Asian countries, and LDCs, the authors find that while discounting can increase costs for advanced developing countries and potentially incentivize them to adopt their own mitigation commitments, it is insufficient on its own to make LDCs competitive. The study concludes that financial, technical, and institutional barriers in LDCs must be overcome for them to realize their theoretical abatement potential, as the abundance of cheap projects in countries like China continues to dominate the market.

• CER discounting can serve as a policy tool to address three main CDM issues: compensating for non-additional projects, incentivizing advanced developing countries to move toward their own mitigation commitments, and improving the competitiveness of Least Developed Countries (LDCs) as project hosts.
• The distribution of CDM projects is highly concentrated, with China, India, and Brazil accounting for over 71% of all projects and 76% of expected CERs, while LDCs host only 0.9% of the pipeline.
• Empirical analysis of 108 projects across 16 countries shows that most CDM projects have abatement costs below 20 USD, with methane and industrial gas reduction being cheaper than CO2-reduction projects.
• Under a discounting scheme that affects advanced Asian countries (Qatar, UAE, Singapore, South Korea, Israel), these countries become less competitive as their abatement cost curves shift upward, though projects remain feasible at CER prices up to 20 USD.
• Even when a discounting scheme is expanded to include China, LDCs remain unimportant in terms of actual abatement potential from the current CDM pipeline.
• While LDCs in Sub-Saharan Africa have a theoretically large abatement potential (estimated at 740 million tCO2 per year), this cannot be realized without overcoming significant financial, technical, and institutional barriers.
• Discounting alone is unlikely to provide sufficient financial incentives to shift investment to LDCs because the large volume of cheap abatement options in China and other attractive hosts will be prioritized first.

APA

Castro, P., & Michaelowa, A. (2009). THE IMPACT OF CER DISCOUNTING ON THE COMPETITIVENESS OF DIFFERENT CDM HOST COUNTRIES. Climate Strategies. https://climatestrategies.org/wp-content/uploads/2014/11/discounting-and-competitiveness.pdf

Chicago

Castro, Paula, and Axel Michaelowa. THE IMPACT OF CER DISCOUNTING ON THE COMPETITIVENESS OF DIFFERENT CDM HOST COUNTRIES. Climate Strategies, 2009. https://climatestrategies.org/wp-content/uploads/2014/11/discounting-and-competitiveness.pdf.

Wikipedia

{{cite report |last1=Castro |first1=Paula |last2=Michaelowa |first2=Axel |title=THE IMPACT OF CER DISCOUNTING ON THE COMPETITIVENESS OF DIFFERENT CDM HOST COUNTRIES |publisher=Climate Strategies |date=30 March 2009 |url=https://climatestrategies.org/wp-content/uploads/2014/11/discounting-and-competitiveness.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{castro2009impact, author = {Castro, Paula and Michaelowa, Axel}, title = {{THE IMPACT OF CER DISCOUNTING ON THE COMPETITIVENESS OF DIFFERENT CDM HOST COUNTRIES}}, institution = {Climate Strategies}, year = {2009}, month = mar, url = {https://climatestrategies.org/wp-content/uploads/2014/11/discounting-and-competitiveness.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }