Laissez faire and the Clean Development Mechanism: determinants of project implementation in Indian states, 2003–2011

Abstract

India is the world's second-largest host of projects implemented under the Kyoto Protocol's Clean Development Mechanism (CDM). There is, however, considerable variation in the distribution of CDM projects implemented across different Indian states. While a large body of literature examines cross-national variation in the implementation of CDM projects, few studies have analyzed the determinants of sub-national variation in different national contexts. Since India has adopted a laissez-faire approach to CDM project implementation, we theorize that profitable climate mitigation opportunities and political stability are two factors that promote CDM project implementation. A quantitative analysis provides empirical support for a set of hypotheses regarding the effects of these variables on project implementation. First, states with a lot of public electricity generating capacity and industrial capital implement more CDM projects than other states. Additionally, project developers rarely propose CDM projects during election years due to high levels of political uncertainty. Since India's liberal approach prevents the central government from using the CDM to promote sustainable development in less developed states, both India and other host countries should develop coordinated national policies to maximize their gains from CDM projects.Keywords: climate policy; international institutions; Clean Development Mechanism; India; sub-national variation. * This paper was written during a research stay funded by an ERP fellowship of the Studienstiftung des deutschen Volkes. Patrick Bayer gratefully acknowledges this generous funding and is thankful for the hospitality of Columbia University. We thank Michaël Aklin, S.P. Harish, and the anonymous reviewers for helpful comments on a previous draft.

Explaining differences in sub-national patterns of clean technology transfer to China and India

“…In summary, after examining differences in the sub-national distribution of CDM projects with technology transfer in China and India, we find that in India, clean technology transfer is not systematically allocated to provinces that would benefit the most from it, echoing findings from the previous literature (Babu and Michaelowa, 2003;Benecke, 2009;Liu, 2008, 2009;Bayer, Urpelainen, and Wallace, 2013;Bayer, Urpelainen, and Xu, 2014). In China, on the other hand, the central government's systematic strategy of using the CDM as an instrument of economic development allows new technologies to reach less developed provinces with a lot of industrial capacity, as hypothesized in previous works (Ganapati and Liu, 2009;Schroeder, 2009b;Bayer, Urpelainen, and Wallace, 2013).…”

“…Although these examples do not directly shed light on the geography of project distribution in China, they show that the country has a purposeful and coordinated strategy for the CDM at the national level. Notwithstanding that governmental influence can only be indirect in a market-based scheme like the CDM, for our argument to hold it suffices that the Chinese government takes a more principled approach than India's "laissez-faire" policy (Bayer, Urpelainen, and Xu, 2014).…”

“…Thus, differences in sub-national variation cannot be ascribed to overall levels of industrialization. Politically, China's authoritarian institutions differ from India's federal democracy, where elections play an important factor in determining state policy for the CDM (Bayer, Urpelainen, and Xu, 2014). Although an authoritarian ruler's incentives and ability to support CDM technology transfer may differ from a democratic ruler's incentives and ability, these effects should manifest themselves through policy.…”

“…While the Chinese government wields considerable power in setting policy goals at the national level, the Indian government has merely taken on a "market facilitation" role in directing the CDM, placing the coordination of the CDM largely in the hands of the private sector (Benecke, 2009;Liu, 2008, 2009;Bayer, Urpelainen, and Xu, 2014). …”