The Clean Development Mechanism and Sustainable Development: A Panel Data Analysis

The Clean Development Mechanism (CDM) of the Kyoto Protocol is designed to allow the industrialised countries to earn credits by investing in greenhouse gas (GHG) emission reduction projects in developing countries, which contribute to sustainable development in the host countries. This research empirically investigates the long-run impacts of CDM projects on CO2 emissions for 18 CDM host countries over 1990-2007. By allowing for considerable heterogeneity across countries, this research provides strong evidence in support of a significant effect of CDM projects on CO2 emission reductions in the host countries. It offers ample recommendation for improving CDM development and serves to encourage the developing countries to strengthen their national capacity to effectively access the CDM for their sustainable development objectives.