The Role of Agencies in Diffusing the CDM

Abstract

The problem that led to the CDM center initiative was the lack of appropriate CDM market conditions, which thus became a barrier for local companies in using the CDM for their projects. Barriers hampering diffusion included an absence of awareness, knowledge, capacity, availability of project financing, and political support. The saying that the CDM ‘is like a cake falling from the sky,’ which was very common in China around 2005 and 2006, demonstrates the general public skepticism towards the CDM. As an institution it was not known or trusted, and potential market participants were not able to access its benefits and risks. Being risk-averse in nature, most local companies thus refrained from taking the CDM into consideration for project financing. Because the market did not evolve quickly and showed early signs of market failure due to imperfect information, the Chinese government decided to support the initiatives of several local government officials to establish provincial CDM centers.