Interest Groups and Efficient Design of the Clean Development Mechanism under the Kyoto Protocol

The implementation of activities aimed to mitigate global greenhouse gas emissions is more cost-efficient in developing countries than in most of the industrialized world. A Clean Development Mechanism (CDM) is to assure that the interests of all parties implicated in Joint Implementation between industrialized and developing countries be equally represented. This mechanism was decided upon on the Kyoto Conference of the Parties to the Framework Convention on Climate Change, but no provisions on the construction of the CDM were taken. The authors propose it to take the form of a clearinghouse and a project fund. In the light of game-theoretical analysis and practical experience collected during the pilot phase for Activities Implemented Jointly which started in 1995, they advocate a clearly defined set of rules and incentives in order to balance the variety of interests involved and at the same time make the CDM an efficient instrument in preventing man-made climate change.