Climate change mitigation and international finance: the effectiveness of the Clean Development Mechanism and the Global Environment Facility in India and Brazil

Abstract

This study analyzes the effectiveness and efficiency of the two principal United Nations (UN) climate change mitigation finance mechanisms, the Clean Development Mechanism (CDM) and the Global Environment Facility (GEF). The realised abatement and costs of the two mechanisms in India and Brazil (using data from 28 GEF and 233 CDM project documents) are compared with theoretical marginal abatement cost curves, based on bottom-up technology studies. We find that both mechanisms have focused on negative and low-cost abatement potential but still leave substantial theoretical potential in this cost range untapped. CDM has more effectively harvested abatement potential of industrial gases and methane emissions, whereas GEF has more successfully targeted demand-side energy efficiency (EE) and transport emission reduction opportunities. CDM has excelled at capturing abatement potential in areas with a limited understanding of abatement, highlighting the shortcomings of theoretical estimates (such asMarginal Abatement Cost Curves) and the benefits of a market mechanism. In some sectors and technologies (particularly renewable energy), the two mechanisms overlapped, which suggests a need for better coordination in the future.