Environmental Markets: Equity and Efficiency

Proposals that led to the adoption of the Clean Development Mechanism (CDM, Article 12) of the Kyoto Protocol² emerged late in the negotiating process, and consensus on the final text developed with unprecedented speed. The speed of this process, and the centrality of the CDM in brokering the final outcome of Kyoto, have led the chairman of the negotiations to refer to Article 12 as the “Kyoto Surprise.”³ Aspects of the CDM are undeniably innovative and have the potential to take the climate regime and indeed international law into uncharted territory. However, many of the CDM's core concepts can be traced directly to principles and mechanisms that have been discussed within the climate regime since the outset of the negotiations of the Framework Convention.⁴

In essence the CDM will facilitate a form of project-based joint implementation, governed by a multilaterally agreed set of rules and operating under the supervision of an intergovernment body. Annex I (industrialized) parties that

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