back to publication list
Development assistance and the CDM -
how to interpret 'financial additionality'
International
climate negotiations have specified that projects under the Clean
Development Mechanism (CDM) should not lead to a ‘diversion’ of official
development assistance (ODA). It is however unchallenged that ODA can be
used in capacity building for the CDM. Diversion can be interpreted in
purpose, sectoral, and regional terms. There are possibilities to use ODA
benchmarks to define diversion such as the UN 0.7 per cent target but they
are unlikely to be politically acceptable. On the project level, three
main options exist but none of them is perfect. The Development Assistance
Committee of OECD endorses deduction of the value of emissions credits (CERs)
from ODA. This however leads to a long-term pressure on the ODA level.
Differentiating an ODA-financed baseline project and a ‘piggyback’
CDM option is likely to be arbitrary in many circumstances. Even if CERs
do not accrue for the ODA share of the investment, still
private CDM projects are crowded out due to the subsidizing of CDM
projects.
