ABSTRACT
The Clean Development Mechanism (CDM) is a market-based trading mechanism originated by the Kyoto Protocol. It functions to provide subsidy to the developing world for greenhouse gas (GHG) emission reduction, thereby encouraging developing countries to emit less than otherwise they would. It is designed with insight in such a way that the marginal cost of emission reduction especially in rapidly developing countries like India would be less than the developed ones. The reason for the lower marginal cost in developing countries is due to the high potential of CDM availability. The higher emissions in developing countries are due to scale of operation, efciency of the technology adopted, uctuation in plant load factor, and high air and water pollution loads. CDM can also be viewed as market and political mechanisms. It is a market mechanism because its subsidy is provided through the creation of certied emission reduction (CER), and carbon credit values will be calculated accordingly. It is political because it induces developing countries to come forward and participate in the Kyoto Protocol and benet from the GHG emission reduction. The global warming potential of six major GHGs is given in Table 28.1.
