Implementing Kyoto-type Flexibility Mechanisms for India: Issues and Prospects

It has been argued in light of concessions made at Bonn and Marrakech, the market for Clean Development Mechanism (CDM) projects will be small compared to greenhouse gas (GHG) emissions in developing countries and that it will be characterised by low demand and low prices. This paper examines these arguments in the context of India and the likely nature and extent of India’s involvement in CDM activities. It also addresses the issue of division of gains from implementing CDM projects between host and funding parties. In the long run, however, it is inevitable that India along with other rapidly industrialising countries will have to take on GHG reduction commitments. In this context, the important questions that this paper addresses are the possibilities of convergence across Kyoto-type flexibility mechanisms, particularly emissions trading and CDM, and issues of monitoring, enforcement and verification for these mechanisms. JEL Classifications: Q25, Q01, F00, H87