The Kyoto Protocol’s Clean Development Mechanism

Impact on International Trade and Economic Growth

The ACCF Center for Policy Research offers this Special Report to help focus the attention of policymakers on the impact of the Kyoto Protocol and in particular the Clean Development Mechanism on economic growth and wealth transfers among developed and developing countries.

This report, based on a study by Drs. W. David Montgomery and Paul Bernstein of Charles River Associates, finds that while the CDM has the potential to reduce the economic burden of the Kyoto Protocol, it is inferior to full global emissions trading as a cost-reduction device. The global cost of the Protocol could exceed $1 trillion over the 2010–2030 period, even with CDM and Annex B trading. These costs do not reflect the additional economic impact of emission reductions beyond the Kyoto target—some parties have suggested further reductions to 70 percent below 1990 levels (ten times the Kyoto targets).

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