Technology in the clean development mechanism: the role of host country characteristics.

Technology transfer is not an explicit objective of the Clean Development Mechanism (CDM). It however constitutes a potential co-benefit by helping to improve living conditions in developing countries. Understanding the drivers and barriers of technology transfer in CDM projects is therefore essential to direct investment flows in host countries and enhance the current CDM framework. In this respect, the contribution of this paper is twofold. First, it identifies stepping stones and stumbling blocks to technology transfer in the CDM. Higher applied tariff rates on environmental goods and services as well as burdensome administrative procedures to start a new business are found to be negatively associated with the likelihood of a technology transfer. The results are robust to the exclusion of large host countries from the sample, like China and India. Second, as an extension, the paper analyses the correspondence of these supporting factors and barriers with the likelihood of a transfer of the different types of technology (equipment, knowledge or both). The paper concludes with policy recommendations for Non-Annex I governments, and suggestions for improvements to the CDM to better assess technology transfer in offsetting projects.