Factors Affecting the Distribution of CERs: A Cross-Sectional Empirical Analysis

The CDM has promoted GHG reduction activities in developing countries. There is, however, a controversial issue of an unequal distribution of CDM benefits among developing nations. To date, some emerging economies have been receiving the majority of CERs while most LDCs have few of them. This paper, hence, attempts to empirically identify determinants of the amount of CERs in order to suggest potential approaches for LDCs. Consequently, this paper finds that GHG reduction potentials, governance levels, and science and technical levels have significant positive effects on the amount of CERs. In contrast, looking at host countries in LDCs, ODA is the only factor having significant positive effects. This seems to show that CDM activities in LDCs have been implemented against the principle of market mechanism. Ultimately, this paper suggests that, LDCs ought to ameliorate their endogenous factors (i.e., governance levels and science and technical levels), and that international organization and advanced nations should further encourage LDCs by providing finance and capacity development programs.