Emily Kunen

Achieving sustainable development through carbon finance: lessons learned in bundling small-scale bioenergy projects in developing countries

With increasing awareness of climate change and how anthropogenic greenhouse gas (GHG) emissions contribute to it, people around the world have been looking for ways to reduce these emissions. One attempted solution has been the development of carbon finance – a flexible mechanism by which the emissions of one individual, company, or country may be offset by the purchase of credits corresponding to emissions reductions in other locations. As a source of financing, these markets hold a lot of potential for sustainable development projects in developing countries, projects such as small-scale renewable energy technologies for community development. Certain mechanisms are particularly well suited for these types of projects: the Kyoto Protocol’s Clean Development Mechanism (CDM), and the Gold

Standard (GS) Foundations’ certification, for instance, both have the dual objectives of reducing GHG emissions and promoting sustainable development.  

This paper examines whether the CDM and GS achieve their sustainable development objectives. It investigates the lessons learned from the experiences of small-scale bioenergy bundles that have both attempted to access carbon finance and demonstrated sustainable development outcomes. Through a literature review and case study analyses of eight smallscale bioenergy bundles in developing countries, a process-tracing methodology is used to identify strengths and weaknesses of the CDM and GS in promoting sustainable development. This analysis compares the theoretical way that the CDM and GS promote sustainable development with the processes in practice. From the discrepancies between the theoretical and real processes, the barriers facing sustainable development promotion through carbon finance are identified. From an analysis of how the case studies overcame the barriers, a set of requisite strengths that projects need in order to access the CDM and GS in their present state is identified. Lastly, recommendations are made for improving these finance mechanisms to better achieve their stated objectives.

It is determined that the mechanisms theoretically promote sustainable development by preferentially selecting the projects with the greatest potential sustainable development outcomes, monitoring those outcomes, and then holding the projects accountable for them. In practice however, there are barriers that disrupt each stage of that process. The case study iv analysis shows that to overcome these barriers, the successful projects had several strengths that the majority of small-scale clean energy projects in developing countries do not have. The conclusion is that neither the CDM nor the GS achieve their sustainable development objectives because they exclude the projects with the highest sustainable development outcomes, and they do not take sufficient measures to ensure that the projects they do register actually produce the sustainable development outcomes they might expect.