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Certified Emission Reduction credits and the role of investments : Evidence from wind CDM projects in China

Omid Sabbaghi (College of Business Administration, University of Detroit Mercy, Detroit, Michigan, USA)
Jing Li (International School of Economics and Management, Capital University of Economics and Business, Beijing, China)
Navid Sabbaghi (School of Economics and Business Administration, Saint Mary’s College of California, Moraga, California, USA)

International Journal of Energy Sector Management

ISSN: 1750-6220

Article publication date: 5 June 2018

Issue publication date: 24 July 2018

164

Abstract

Purpose

This study aims to investigate the cross-sectional and time-series dynamics of realized Certified Emission Reduction (CER) credits issued and the role of investments for a seminal sample of China’s Clean Development Mechanism (CDM) projects specializing in the wind sector.

Design/methodology/approach

The study investigates the dynamics of realized CER credits issued and the role of investments using traditional cross-sectional and time-series regression analysis.

Findings

The study results find that the level of investment per megawatt (MW) of power generation is an important predictor for the expected number of realized CER credits issued in the cross-section of China’s wind CDM projects. Additionally, the study finds evidence of time trends and seasonality when examining the time series of realized monthly CER credits: CER credits issued are lower in the summer and higher in the winter.

Originality/value

The study results highlight the importance of financing CDM projects and suggest guidelines in which investors are able to better assess how much to invest based on the anticipated CER credits in the Project Design Document. Additionally, the results suggest opportunities for the CDM Executive Board surrounding the Project Design Document and the anticipated CER credits contained therein. The present study contributes to the literature on strategic tools for addressing climate change and offer insights that narrow the gap between empirical finance and sustainable business practice in the context of CDM projects.

Keywords

Acknowledgements

Jing would like to thank the Research and Innovation Centre of Metropolis Economic and Social Development, Capital University of Economics and Business. The authors are grateful for useful comments and suggestions provided by the anonymous referees.

Citation

Sabbaghi, O., Li, J. and Sabbaghi, N. (2018), "Certified Emission Reduction credits and the role of investments : Evidence from wind CDM projects in China", International Journal of Energy Sector Management, Vol. 12 No. 3, pp. 386-407. https://doi.org/10.1108/IJESM-06-2017-0005

Publisher

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Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited

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