A Cross-Country Empirical Analysis of Determinants of Clean Development Mechanism (CDM) Projects

The CDM seems to play a significant role in international GHG reduction activities. Yet, a few emerging countries have hosted majority of CDM projects whereas most LDCs have not hosted CDM projects at all. Given the current distributional imbalance, this study aims to identify determinants of CDM project hosting based on an empirical analysis using the tobit model. On the basis of the literature review, this study focuses on two factors, namely the host countries’ qualities of business environment and scientific level. As a result, this study finds the significance of business environment for both bilateral and unilateral CDM projects. Likewise, the significance of scientific and technical level is confirmed especially for unilateral CDM projects. Finally, this article suggests that eligible host countries should focus exclusively on the improvement of controllable determinants such as business environment to attract CDM investors. In addition, it is likely to be better for eligible host countries with low GHG emissions to develop CDM projects unilaterally using programmatic CDM due to their lower economic attractiveness.