Clean development mechanisms in Latin America: Efficiency analysis of energy-generating projects

Abstract

This research addresses two key questions related to Clean Development Mechanism (CDM) This research aimed to address two research questions related to CDM projects focused on energy generation in Latin America. The first question aimed to identify the most efficient projects carried out in this region, while the second question sought to identify their characteristics. These questions were proposed based on a clear gap identified in the scientific literature, particularly regarding these ventures developed in the region, which may be of interest to researchers, investors, and project managers alike. To answer these questions, a quantitative analysis was conducted using the database on CDM projects provided by the United Nations Framework Convention on Climate Change, employing two techniques. The first technique used was Data Envelopment Analysis, which generated an efficiency ranking for these projects. In this study, efficiency is considered as the results achieved by the project in terms of energy generation capacity and carbon emission reduction, relative to the resources invested in it. The second technique was the non-parametric Mann–Whitney test, which helped identify characteristics that exhibited significant differences in efficiency. Among the findings, three key characteristics were identified as relevant in explaining this difference: project scale, type, and country where they were developed. Large-scale projects—specifically those in the categories of Methane Avoidance, Landfill Gas, and Energy Efficiency Supply Side—as well as projects carried out in Mexico and Colombia, demonstrated significantly higher efficiency based on the model used in this research. Furthermore, Hydro and Biomass Energy projects were identified as having significantly lower efficiency compared to the others. The outcomes of this study hold significance in two aspects. Firstly, from an academic standpoint, it expands the understanding of project characteristics of these projects in Latin America by establishing a comparative analysis among them. Secondly, from a more practical perspective, the results can guide investors in defining a more suitable profile for energy-generating CDM projects, thereby reducing risks and increasing the likelihood of success. Moreover, these findings can lay the foundation for the formulation of public policies aimed at promoting projects with a more efficient profile. This is especially important given the waning interest in this crucial mechanism over the past decade, potentially spurring the execution of new projects and altering this reality.