Clean Development Mechanism, Programmatic CDM as a means to level the playing field between developing countries:Kenya as a case study country

The Clean Development Mechanism (CDM) is a United Nations mechanism with the dual objective to reduce greenhouse gas emissions as well as to contribute to sustainable develop-ment. CDM shows besides remarkable successes some flaws and shortcomings. Especially, concerns exist about the effectiveness of CDM to contribute to the sustainable development in the host country. Furthermore, the CDM portfolio is strongly skewed in the sectoral and geo-graphic distribution. A few sectors and a small number of countries take the lion share of re-sulting money flows. Also, CDM is currently unable to utilise its full potential. The small pro-jects are in the current CDM structure unattractive to exploit, while they represent a large po-tential emission reduction and the possibility to strongly contribute to sustainable develop-ment, because of the possibility to reproduce such projects easily and their local, small scale characteristics. The potential of the small scale projects is very high in the currently underrep-resented countries in the CDM portfolio. The CDM geographic distribution is found to be mainly influenced by the investment climate in the host country, the institutional capacity regarding CDM in the host country and the emission reduction potential of the host country. A statistical analysis shows that the invest-ment climate, indicated by the foreign direct investment, seems to be a stronger explantory factor than the emission reduction potential. The sectoral distribution is dominated by the very large industrial CDM projects that generate large amounts of emission credits, creating an attractive investment opportunity. These pro-jects, however contribute little to sustainable development. Also, they leave less space for the CDM projects that are more able to realise sustainable development. To address the issues of CDM, the Parties of the United Nations have created programmatic CDM (pCDM). pCDM allows for the aggregation of many small projects into one large pro-gram. This structure addresses the issues mentioned above because it drastically increases the attractiveness of the very small scale projects, due to the lower assosciated costs. In thid way pCDM addresses the issue of the skewed geographic distribution and unused potential. Fur-ther, the small scale characteristics of the projects are found to be better able to contribute to sustainable development than the more large scale projects that are currently utilised in the CDM. Due to its recent introduction, with no pCDM projects currently in operation, the functioning and effectiveness of pCDM is unclear. With the use of three theoretical pilot projects in Kenya the structure and effectiveness of the pCDM is investigated. It is found that pCDM is certainly a valuable addition to CDM, with the possibility of strongly contributing to sustainable development in the host country, while at the same time realising large amounts of emission reductions. Furthermore, it is found that pCDM in itself will not be able to deal with the problematic issues of CDM completely. The role played by the the host country is important. The host country should create an investment climate that is suitable and attractive for outside pCDM- investors. Additionally, the institutional capacity needed to op-erate pCDM projects is found to be much more complex than CDM projects, and the host countries therefore need a strong (p)CDM-related institutional capacity. Further research is needed to determine whether the kind of instutional capacity that is needed for pCDM should be different than the kind of institutional capacity that is needed for regular CDM. Also, further research is required to investigate whether the investment climate is as important in pCDM as it is in CDM. It can be concluded that pCDM is a valuable addition to CDM, making the overall clean de-velopment mechanism stronger and more effective. Whether the pCDM in the end will play a large role in the CDM, depends to a high degree on the outcome of the UN post- Kyoto nego-tiations.