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

The report evaluates the Clean Development Mechanism's (CDM) ability to provide sustainable development benefits to developing countries. It finds that the current project pipeline is skewed toward low-development-impact industrial gas projects, is insufficient in scale to meet market demand, and is geographically concentrated in a few countries, largely bypassing least-developed nations. To address these gaps, the authors recommend reforming the Executive Board's processes, introducing top-down sectoral and policy-based CDM approaches, and increasing international financial support for high-benefit projects.

• A significant portion of the CDM project pipeline consists of industrial projects that provide minimal sustainable development benefits, specifically those using end-of-pipe fixes to capture or decompose high global warming potential gases. For example, two HFC23 decomposition projects account for 30% of expected certified emissions reductions (CERs), and landfill gas and HFCs together represent nearly three-quarters of the pipeline.
• The current volume of CDM projects is insufficient to meet the projected market demand for CERs. As of April 6, 2005, the pipeline projected an average of 26.3 Mt CO2e per year, while estimated demand by 2010 ranges from 217 to 640 Mt CO2e per year.
• CDM investment is heavily concentrated in a small number of developing countries, leaving least-developed countries (LDCs) largely excluded. Brazil, India, and Chile account for 70% of expected CERs, while only two of the 49 UNFCCC-defined LDCs—Bhutan and Bangladesh—had projects in the pipeline, with only one project each.
• High transaction costs and complex approval processes, particularly regarding the definition of additionality, act as barriers to investment and disproportionately penalize small-scale projects that often have higher sustainable development benefits.
• The report proposes shifting from a project-by-project 'retail' model to 'wholesale' top-down approaches, such as policy-based and sectoral CDM, to expand activity and target sectors with high development potential like transportation and renewable energy.

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} }