Delegation and Accountability in the Clean Development Mechanism: The New Authority of Non-State Actors

By Green, Jessica F. | Journal of International Law & International Relations, Summer 2008 | Go to article overview

Delegation and Accountability in the Clean Development Mechanism: The New Authority of Non-State Actors


Green, Jessica F., Journal of International Law & International Relations


Introduction

It is fashionable these days to speak of the rise of public-private partnerships; surprisingly, however, there is relatively little scholarship on the interaction between states and private actors at the supranational level. This paper offers an in-depth case study of the Clean Development Mechanism (CDM)--one of the three market mechanisms of the Kyoto Protocol--which features a prominent role for non-state actors. Drawing from the principal-agent literature, this paper analyses the mechanics of the complex--and increasingly fragmented-institutional arrangements of the CDM, and draws some conclusions about the functioning of the mechanisms created to ensure the accountability of private agents.

The CDM provides incentives for reducing greenhouse gas emissions by allowing developed countries to purchase emissions credits for abatement activities undertaken in developing countries, and to apply these credits against their overall targets. Since all developed countries that are party to the Protocol (1) have committed to meeting specific reductions by the end of 2012, the CDM allows them to do so in what is, theoretically, the most cost-efficient manner--by purchasing emissions reductions where they are most cheaply produced, i.e. in the developing world.

The CDM has delegated considerable authority to private actors. The complexities of creating and regulating a new market in greenhouse gas (GHG) emissions have prompted the creation of a number of subsidiary bodies. In turn these bodies have been delegated authority to create and implement rules, help resolve disputes, monitor and verify participants' behaviour and award emissions reductions credits. These subsidiary bodies use private actors both as consultants and as agents to carry out specific measuring and monitoring tasks.

To evaluate how well the principal--in this study, the Executive Board of the CDM--is able to control the agents--the "Designated Operational Entities"--I conducted an analysis of 752 projects submitted to the Executive Board between December 2004 and June 2007. The results are of this analysis are mixed. Although many of the oversight procedures in place appear to be functioning well, there are some fundamental structural issues that may contribute to agents acting in rent-seeking ways, to the detriment of the principals. Specifically, the small number of firms qualified to carry out monitoring and verification raises concerns of monopoly and collusion. Moreover, the pace of accrediting new private agents is proceeding very slowly. There are considerable barriers to entry, including the knowledge and expertise that potential agents must first acquire, as well as the lengthy process to become an accredited Designated Operational Entity (DOE). Finally, there is little evidence that the "police patrol" oversight mechanisms are functioning well. In sum, the data indicate that though the CDM was designed in a way to maximize the Executive Board's control over the Designated Operational Entities, in practice, we cannot be assured that these private agents are not pursuing their own goals, at the cost of those delegated to them.

Given the vast literature on international organizations, why look at a small subsidiary body such as the CDM? There are two answers which explain the significance of this case study. First, although there is talk of the "death" of the Kyoto Protocol, the CDM is thriving--and growing exponentially. As of July 1, 2008, the CDM had granted over 160 million credits or "certified emissions reductions" (CERs) through more than 1100 projects. (2) Currently, there are approximately 3000 additional projects in the pipeline, estimated to represent over 2.7 billion CERs. (3) One CER is equivalent to one metric ton of carbon dioxide (or the equivalent amount of other greenhouse gases). The price of CERs has fluctuated, but ranges between 13 [euro] and 16 [euro] per metric ton of carbon dioxide. …

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Delegation and Accountability in the Clean Development Mechanism: The New Authority of Non-State Actors
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