An econometric analysis of sub-national Clean Development Mechanism performance in China

The objective of this research is to conduct a quantitative analysis of China’s sub-national Clean Development Mechanism (CDM) performance as a case study of unbalanced CDM performance within a CDM host country. Key results are as follows: First, investment climate is the most decisive factor, which can explain about 48 % (adjusted R-squared) of China’s sub-national CDM performance at significance level 0.1 %. Second, general economic and investment conditions have a collective determination effect, which together explain about 50 % (adjusted R-squared) of sub-nationall CDM performance. Third, when compared with previous research in which the economic and investment conditions explain about 55 % (adjusted R-squared) of unbalanced CDM performance on the international level, it becomes clear that the impact of the economic and investment conditions on China’s sub-national unbalanced CDM performance resembles the unbalanced performance at the international level. Hence, we conclude that the sub-national unbalanced CDM performance in China is similar to that of the international level, and is influenced by similar determining factors. This finding casts doubt on the previous policy suggestion to fix the geographically unbalanced CDM performance simply by national discrimination, such as by revoking CDM eligibility of an entire host country. Consequently, a more tailored approach is advisable to manage that eligibility on the sub-national level. This is a more precise response to geographically unbalanced CDM performance and is less likely to discourage participation of the dominant CDM host countries in international climate mitigation.