The Clean Development Mechanism Worldwide and in Brazil - Implementing Environmental and Resource Management - page 71

means that an Annex-I country or a company of an Annex-I country supports a
project in the other country in order to obtain tradable emission grants. In the case
of Joint Implementation (Article 6 of the Kyoto Protocol), the project takes place
in another Annex-I country, i.e. in a host country with emission limitations. The
investor earns so-called “Emission Reduction Units” (ERUs), that can be used to
fulfil own national obligations or traded on the emission allowance market.
On the other hand, Clean Development Mechanism projects take place in de-
veloping countries or countries in transition, which have no obligation to reduce
their emissions and are therefore not mentioned in Annex-I of the Kyoto Protocol.
In this case, the investor obtains “Certified Emission Reductions” (CERs) that be
traded or used to fulfil national obligations, similar to the ERUs derived from Joint
Implementation projects. The main difference is that ERUs are subtracted from the
assigned emission permits of the host country of JI projects as they also have obli-
gations to reduce their emissions, while this is not the case in CDM projects as
these host countries have no obligation. Compared with the other two flexible
mechanisms, the CDM offers several advantages for investments mainly due to
the incorporation of projects in industrializing countries which go along with at-
tractive emission avoidance costs and the “prompt start”. Emission reductions are
accredited from January 2000 onwards, while emission permits obtained by Emis-
sion Trading and Joint Implementation are accredited only from 2008 onwards.
One of the disadvantages is the higher transaction costs due to more complex veri-
fication procedures (Pohlmann 2004). In general, the project cycle of the Clean
Development Mechanism can be considered as ecologically and economically ef-
fective. Rigid mutual control mechanisms between the involved parties and public
control assure that emission reductions in the form of CERs fulfill the necessary
requirements. At the same time, CDMs offer the chance of participation to a wide
range of potential investors (Pohlmann 2004).
8.3 Problems of the Clean Development Mechanism
However, problems may arise from certain requirements related to additionality
and sustainability. Both criteria are characterized by a lack of clear and interna-
tional-wide accepted definitions. Furthermore, CDM activities are inequitable dis-
tributed.
8.3.1 Additionality
Additionality is an important criterion for the certification of CDM projects in or-
der to assure that only emission reductions beyond the business-as-usual scenarios
are considered. This implies that the baseline scenario is the weak point for the
exact calculation of generated emission reductions. Even though the baseline sce-
narios undergo rigid examinations by the Executive Board (Betz et al. 2005),
Pohlmann (2004) distinguishes four different types of additionality of which only