Financing the Clean Development Mechanism through Debt-for-Efficiency Swaps? Case Study Evidence from a Uruguayan Wind Farm Project

As one of Kyoto’s three flexibility mechanisms, the Clean Development Mechanism (CDM) allows the issuance of Certified Emission Reduction credits from offset projects in non-Annex I countries. As little attention has been paid to how CDM projects are financed, this article assesses whether offset sc...

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Bibliographic Details
Published in:European journal of development research 2014-01, Vol.26 (1), p.142-159
Main Authors: Cassimon, Danny, Prowse, Martin, Essers, Dennis
Format: Article
Language:English
Subjects:
Benefits
Budget, Government
Budgets
Climate change
Costs
Credit
Debt
Debt financing
Debt policy
Debt repayment
Debt restructuring
Developing countries
Development and Social Change
Development Economics
Development Policy
Development Studies
Economic Development
Efficiency
Emissions
Emissions control
Emissions trading
Energy industry
Energy market
Environmental effects
Environmental protection
Equity
Farms
Finance
Global warming
Government
Government Policy
Greenhouse gases
International finance
Investments
LDCs
Original Article
Public Finance
Social Sciences
Spain
Studies
Sustainable development
Uruguay
Uruguayans
Wind energy
Wind farms
Wind power
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Summary:As one of Kyoto’s three flexibility mechanisms, the Clean Development Mechanism (CDM) allows the issuance of Certified Emission Reduction credits from offset projects in non-Annex I countries. As little attention has been paid to how CDM projects are financed, this article assesses whether offset schemes with public bodies should utilise debt swaps as a form of funding. Specifically, we examine whether a debt-for-efficiency swap between Uruguay and Spain within a wind power project increased project finance and generated greater development co-benefits. We assess the transaction using a simple evaluative framework: whether it delivered additional resources to the debtor country and/or government budget; whether it delivered more resources for climate change mitigation; whether it had a sizeable effect on overall debt burdens (creating ‘indirect’ benefits); and whether it aligned with government policy and systems (elements of the new aid approach). We find evidence that cautions against using the Spanish–Uruguayan case as a model for future debt-for-efficiency swaps.
ISSN:0957-8811
1743-9728
DOI:10.1057/ejdr.2013.34