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Title:Development Aid and the CDM - How to interpret "Financial Additionality" PDF Logo
Authors:Dutschke, Michael
Michaelowa, Axel
Issue Date:2003
Series/Report no.:HWWA Discussion Paper 228
Abstract:International climate negotiations have specified that projects under the Clean Development Mechanism (CDM) should not lead to a ?diversion? of official development assistance (ODA). It is however unchallenged that ODA can be used in capacity building for the CDM. Diversion can be interpreted in financial, sectoral and regional terms. There are possibilities to use ODA benchmarks to define diversion such as the UN 0.7% target but they are unlikely to be politically acceptable. On the project level, three main options exist but none of them is perfect. The value of emissions credits (CERs) could be deducted from ODA. This however leads to a long-term pressure on the ODA level. Differentiating an ODA-financed baseline project and a ?piggyback? CDM option is likely to be arbitrary in many circumstances. Even if CERs do not accrue for the ODA share of the investment, still private CDM projects are crowded out due to the subsidising of CDM projects.
Subjects:International climate policy
CDM
development assistance
JEL:Q25
O13
Document Type:Working Paper
Appears in Collections:HWWA Discussion Paper, Hamburgisches Welt-Wirtschafts-Archiv

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