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Expanding the development benefits from carbon offsets

The Clean Development Mechanism (CDM)of the Kyoto Protocol which allows for trade in emission reductions between developing and developed countries has a specific aim of ensuring that carbon emission reduction projects contribute to sustainable development of the host country according to standards set by that country. However, the development potential of transactions under the CDM is constrained by a number of factors. Governments face the dilemma of setting demanding sustainable development criteria and running the risk of losing investments to other developing countries with less demanding standards, or setting less stringent standards and thus generating little benefit at the local level. This is compounded by the fact that concluding deals under the CDM in developing countries is more expensive, time-consuming and risky than buying carbon credits elsewhere.

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