Determinants of clean development mechanism activity: Evidence from China

As regards the dual goals of additionality and sustainability, some clean development mechanism (CDM) projects were successfully registered while some were rejected by the Executive Board (EB). This paper focuses on two final statuses of these projects and aims to explore the potential determinants of CDM activities. Based on the Chinese samples of the rejections and registrations, we find that (1) according to the financial barrier analysis with the internal rate of return without CDM, the additionality is the most important and robust rule of CDM activities and the CDM projects successfully registered are more additional than the rejected ones in China; (2) the sustainability is another important determinant of CDM activities in China and Chinese CDM activities are sustainable in terms of size, while the EB is criticized for its selection of unsustainable CDM projects in terms of cost-effectiveness on emission reductions within a long period or in terms of hydropower plants; (3) some other factors including the prices of sale electricity and certified emission reductions, the generating capacity and installed capacity all tend to pose significant impacts on the final status of each project that features the CDM activities in local areas of China.