Reforming the Clean Development Mechanism to Accelerate Technology Transfer

The Clean Development Mechanism (CDM) is the largest technology-transfer mechanism under the United Nations Framework Convention on Climate Change (UNFCCC). The idea of maintaining it or scaling it up in the post-2012 period, to accelerate technology transfer, is hence attractive. The weak environmental integrity of the CDM and its propensity to promote predominantly end-of-pipe technologies, however, caution against its perpetuation under a new global climate accord. This paper proposes that, if the CDM were to be maintained, reforms should be adopted to improve the investment conditions for key climate technologies and modify the incentive structure of the CDM. While such reforms contribute to making key technologies more attractive for investors they do not address the CDM’s inability to foster policy reforms. This paper therefore suggests that the CDM is progressively phased out in favour of sectoral carbon crediting mechanisms.