Realizing the Development Dividend: Making the CDM Work for Developing Countries

This executive summary evaluates the Clean Development Mechanism (CDM) under the Kyoto Protocol, focusing on its ability to provide a "development dividend"—benefits to developing countries in economic growth, technology, poverty alleviation, and health beyond climate mitigation. The authors argue that the current project pipeline is under-performing, skewed toward a few countries, and dominated by low-development-benefit industrial gas projects, necessitating reforms in project cycles, rules, and international financing to ensure sustainable development goals are met.

• The CDM is currently failing to deliver a significant development dividend because a large portion of the project pipeline consists of industrial "end-of-pipe" fixes that capture gases with high global warming potential, which offer minimal sustainable development benefits. Specifically, HFC23 decomposition projects accounted for 30 per cent of expected certified emissions reductions (CERs) from the roster at the time of writing, and landfill gas and HFCs together represented almost three quarters of the pipeline.
• There is a significant gap between the supply of CERs from the current CDM project roster and the estimated market demand. While demand is estimated between 217 and 640 Mt CO2e per year by 2010, the current roster of projects is projected to deliver an average of only 26.3 Mt CO2e per year over the first commitment period.
• CDM investment is heavily concentrated in a small number of developing countries, neglecting the least-developed countries (LDCs). Brazil, India, and Chile account for 70 per cent of expected CERs. Out of 49 UNFCCC-defined LDCs, only Bhutan and Bangladesh had projects in the pipeline, with one project each.
• High transaction costs and complex approval processes, managed by the Executive Board (EB), deter investment and disproportionately penalize small-scale projects with high sustainable development benefits. The authors suggest the EB should become a professional body with full-time staff and that additionality for small-scale projects should be assumed.
• To move beyond the inefficient project-by-project "retail" model, the report recommends adopting "wholesale" top-down approaches, including policy-based CDM, sectoral CDM, and unilateral CDM (projects without Annex I investors). It also suggests expanding the CDM to include small-scale sinks projects in agriculture and avoided deforestation.
• The lack of a universal definition of sustainable development has led to inconsistent national regimes, with some criteria being too restrictive and others too vague. The report recommends that international organizations and NGOs assist developing countries in defining sustainable development at the national level and that the Parties establish guiding international principles.

APA

Cosbey, A., Parry, J.-E., Browne, J., Babu, Y. D., Bhandari, P., Drexhage, J., & Murphy, D. (2005). Realizing the Development Dividend: Making the CDM Work for Developing Countries. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/climate_realizing_dividend_sum.pdf

Chicago

Cosbey, Aaron, Jo-Ellen Parry, Jodi Browne, Yuvaraj Dinesh Babu, Preety Bhandari, John Drexhage, and Deborah Murphy. Realizing the Development Dividend: Making the CDM Work for Developing Countries. International Institute for Sustainable Development, 2005. https://www.iisd.org/system/files/publications/climate_realizing_dividend_sum.pdf.

Wikipedia

{{cite report |last1=Cosbey |first1=Aaron |last2=Parry |first2=Jo-Ellen |last3=Browne |first3=Jodi |last4=Babu |first4=Yuvaraj Dinesh |last5=Bhandari |first5=Preety |last6=Drexhage |first6=John |last7=Murphy |first7=Deborah |title=Realizing the Development Dividend: Making the CDM Work for Developing Countries |publisher=International Institute for Sustainable Development |date=May 2005 |url=https://www.iisd.org/system/files/publications/climate_realizing_dividend_sum.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{cosbey2005realizing, author = {Cosbey, Aaron and Parry, Jo-Ellen and Browne, Jodi and Babu, Yuvaraj Dinesh and Bhandari, Preety and Drexhage, John and Murphy, Deborah}, title = {{Realizing the Development Dividend: Making the CDM Work for Developing Countries}}, institution = {International Institute for Sustainable Development}, year = {2005}, month = may, url = {https://www.iisd.org/system/files/publications/climate_realizing_dividend_sum.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }