Governing clean development in least developed countries: do CDM rules promote renewable energy in Ethiopia?

Governing clean development in least developed countries: do CDM rules promote renewable energy in Ethiopia?

Paper examining the impacts of Clean Development Mechanism rules on renewable energy investment and governance in Ethiopia

The Clean Development Mechanism (CDM) has mobilised significant investment in renewable energy technology around the world. Yet there is a pressing need to reform CDM rules to incentivise renewable energy investment in low-income countries, this paper concludes. The theoretical approach of this study to analysing climate governance processes is grounded in sociological institutionalism. Applying this analysis to the CDM as a governance institution nested within the overarching climate regime, it sets forth a nuanced understanding of the rules, the potential for reform and the relevance of this for the least developed countries (LDCs). In order to better adapt these rules, it is important to note how host-country governance processes are impacted by CDM's institutional dimensions. With this in mind, the paper presents a case study of how CDM rules for renewable energy generation impact governance in Ethiopia.

The paper discusses the literature on the CDM, noting the relative lack of material regarding the mechanism's relevance for LDCs, as well as empirical case studies on under-represented countries. Various concepts of governance are discussed, including the distinction between earlier institutionalist theory and 'new institutionalism' – i.e. not only do institutions constrain and empower other actors, but these actors in turn shape the institutions. Accordingly, there is a need to develop and refine the theoretical underpinning of the CDM. It is important to understand the complexity of the dynamics and impacts to the various actors involved.

Almost 2.75 billion Certified Emission Reductions (CERs) are expected to be issued for sale through almost 7000 active CDM projects by the end of 2012. However, only 2.6 per cent of CDM projects are located in Africa, despite interest and potential. One major problem investigated in the case of Ethiopia is that CERs are determined from a baseline-level/result comparison; in countries with an already minimal baseline-level of emissions, there is little financial incentive to invest. Furthermore, despite LDCs requirements for domestic energy investment, only the export of renewable energy to neighbouring ‘dirty’ countries is in fact incentivised.

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