An analysis of the relationship between the additionality of CDM projects and their contribution to sustainable development

The Clean Development Mechanism (CDM) allows industrialised countries to use credits from greenhouse gas abatement projects in developing countries in order to fulfil their own emission reduction commitments. There has been mounting evidence that the CDM's ability to fulfil its goals as stipulated by the Kyoto Protocol-contributing to the sustainable development of the host countries and delivering real, measurable and additional emission reductions-is less than satisfactory. In this article, an evaluation is made of CDM projects' likelihood of being additional by assessing the impact Certified Emission Reductions have on the Internal Rate of Return of the individual projects. In addition, the projects' sustainable development benefits are assessed by using a multi-criteria analysis. In a final step, the relationship between the projects' additionality and sustainability contribution is assessed and a trade-off between these two CDM goals is established, revealing a potential inherent conflict in how the current mechanism works. The analysis is based on a systematic evaluation of 40 registered CDM projects in India.