ESTIMATED AND ACTUAL EMISSION REDUCTIONS IN CLEAN DEVELOPMENT MECHANISM (CDM) PROJECTS IN VIETNAM

Abstract

Adopted in 1997, the Kyoto Protocol set legally binding targets of Green House Gas (GHG) emission reductions for Annex-I countries (mainly industrialized countries and countries with economies in transition) who signed the 1992 United Nation Framework Convention on Climate Change (UNFCCC). Being one of the three flexible mechanisms under the Kyoto Protocol, the Clean Development Mechanism (CDM) enables Annex-I countries to involve their investments in GHG mitigation activities carried out in developing countries and acquire Certified Emission Reductions (CERs). As such, the mechanism serves the dual purposes of assisting Annex-I countries in fulfilling their commitment targets and at the same time contributing to the sustainable development of the host countries. Vietnam is an attractive destination for CDM investment inflows thanks to its emerging economy, significant mitigation potential and favourable natural conditions. However, practical cases showed poor CDM project experience and deteriorated investment climate in the country. This study hence focused on performance of CDM projects in Vietnam in terms of CERs generating capacity and investigated the relation between projects’ expected and actual annual CERs. Regression analysis was performed on a sample of 30 CDM projects implemented in different regions in Vietnam. To examine the potential influence of the outlier on the accuracy of the model, a second regression was calculated with the outlier excluded. The results given by both regression models showed strong relation between the two variables. Estimated emission reductions were generally higher than their actual values and the magnitude of the difference could be measured based on the developed regression function. More importantly, the study suggested a means of predicting projects’ capacity of CERs generation given its estimation of emission reductions. The model consequently could assist CDM investors in making more informed investment decisions.