The Clean Development Mechanism was created as part of international climate change agreements under the United Nations Framework Convention on Climate Change, and was eventually incorporated into the Kyoto Protocol. It has overseen the delivery of over 3,500 clean technology projects in developing countries since its inception.
The intention of the Clean Development Mechanism was to provide flexibility in how nations go about achieving reductions in global greenhouse gas emissions. It allows developed countries, like Australia, to accumulate emissions offsets, created by the completion of infrastructure projects in developing nations. These offsets can be used as an alternative to domestic emissions reductions required under the Kyoto Protocol.
Offsets are the primary focus of the Clean Development Mechanism, but the effect it has had in driving technology transfer cannot be understated. A great number of renewable energy and energy efficiency projects have occurred as a result of the Clean Development Mechanism and it would be difficult to argue that this has not been a good result. It has helped increase the capacity for developing countries to generate and use energy in a sustainable manner.
However, the design of the Clean Development Mechanism has also resulted in the greatest value being found by completing projects in the richer of the developing nations. These nations are India and China, and to a lesser extent Brazil and Mexico. Based on the design of the Clean Development Mechanism, this outcome could have been predicted.
The design of the Clean Development Mechanism provides little incentive to enter into such projects in the least developed nations, as they would not generate the necessary offsets to make the investment in a project worthwhile. To generate emissions offset certificates, you first need to find emissions capable of being offset.
But why even consider a project in a struggling small Pacific Island state when they have almost no greenhouse gas emissions that are easy to reduce? Why would a developed nation consider sponsoring a project to construct a solar power station in any of the underdeveloped African nations when they lack the network infrastructure to support it?
It would be like establishing a car dealership in a town with no petrol stations. It makes little economic sense and the projects would not have the necessary support to succeed over the long term.
Instead, the best value in development projects is found by approaching one of the rapidly emerging nations. The big emitters turn to China (host of 46 per cent of clean development projects) and India (more than 20 per cent), whose economic and emissions growth already outstrips those of most developed nations, to host clean technology projects that can generate the offsets they desire.
Additionally, the required infrastructure necessary to support renewable electricity generation projects already exists in these nations.
And so, the Clean Development Mechanism drives development in the fastest growing nations, whilst remaining inaccessible to the least developed nations, those who need development assistance the most.
Lacking an incentive to provide the fundamental infrastructure required to support electricity generation and consumption, the Clean Development Mechanism ensures development assistance is focused on the emerging nations, at the detriment of development in the poorest of states.
Compounding the issue regionally is the fact that between them, Australian and New Zealand have instigated just four projects within the Asia Pacific region. Despite being regional economic powers, they have largely ignored an ideal opportunity to provide what would effectively be subsidised foreign development assistance to our Asia Pacific neighbours.
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