A study on systems for a clean development mechanism to reduce CO2 emissions

The clean development mechanism (CDM) is expected to facilitate technology transfer from developed to developing countries, as well as to economically reduce greenhouse gas emissions. This article aims at evaluating strategies in CDM, in which developing countries can improve industrial energy efficiency with financial support from developed countries. First, we investigated characteristics of the systems utilizing game theory. Analytical results revealed that technology transfer through the system might be considerably diminished, depending on the shapes of the marginal cost functions for reducing CO2. Next we estimated actual marginal cost curves of countries involved in CDM, in order to know the cost-effectiveness of CO2 reduction options. Input-output tables were utilized in this analysis, since these are established in developing countries as well as in developed countries. We have transformed one country’s input-output table to be adjusted against another country, taking the difference in goods prices into consideration. As far as data on the economy and industry are concerned, we used those from Japan and China, since China has been rapidly increasing its economic scale and greenhouse gas emissions. However, the implications from these analyses are useful also for other countries.