Leveraging private capital for climate mitigation: evidence from the clean development mechanism

Patrick Bayer, Christopher Marcoux, Johannes Urpelainen

Research output: Contribution to journalArticle

13 Citations (Scopus)

Abstract

To mitigate climate change, states must make significant investments into energy and other sectors. To solve this problem, scholars emphasize the importance of leveraging private capital. If states create institutional mechanisms that promote private investment, they can reduce the fiscal cost of carbon abatement. We examine the ability of different international institutional designs to leverage private capital in the context of the Kyoto Protocol's Clean Development Mechanism (CDM). Empirically, we analyze private capital investment in 3749 climate mitigation projects under the CDM, 2003-2011. Since the CDM allows both bilateral and unilateral implementation, we can compare the two modes of contracting within one context. Our model analyzes equilibrium private investment in climate mitigation. When the cost of mitigation is high, unilateral project implementation in one host country, without foreign collaboration, draws more investment than bilateral contracting, whereby foreign investors participate in the project.

Original languageEnglish
Pages (from-to)14-24
Number of pages11
JournalEcological Economics
Volume96
DOIs
Publication statusPublished - 1 Dec 2013

Keywords

  • clean development mechanism
  • climate mitigation
  • private investment
  • unilateral versus bilateral project implementation

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