Impacts of CDM projects on sustainable development: improving living standards across Brazilian municipalities?

The goal of the Clean Development Mechanism (CDM) is both emission reduction and sustainable development, but while emission reductions generate revenues for the project developer, no such benefit results from the achievement of sustainable development. The objective of this research is therefore to analyze to which extent CDM investments have led to sustainable development benefits, and whether there is a difference in these effects between renewable energy and waste handling and disposal projects. Complementary to existing studies, which are based on potential effects reported ex-ante by project developers, this paper aims at quantifying impacts of CDM projects on sustainable development based on empirical data. Using data for years 2000 (pre-CDM) and 2010 (post-CDM) for Brazilian municipalities, this paper combines difference-in-differences assessment with matching techniques to identify the effect of CDM investments on development and poverty indicators by distinguishing for four project’s types: hydro, biomass energy, landfill gas and methane avoidance. Results show that CDM project types have stimulated local income and labor opportunities but only hydro projects have contributed to reduce poverty at the municipal level for the period analyzed.