Development priorities and private investment in developing countries: clean development mechanism projects in the electricity sector

Given the relative weight of future greenhouse gases emissions of the Developing Countries (DCs) in the next decades, offering them the opportunity to participate to climate policies is a condition for achieving the goal of the Climate Convention. Thus, the Clean Development Mechanism (CDM) defined in art. 12 of the Kyoto Protocol, aims at reducing the cost of Annex 1 countries commitment in term of reduction of emissions, but also at limiting the risk that the DCs' unquestionable right to develop will offset the Annex 1 countries efforts: in order to be a win-win mechanism, the CDM should help to progress faster on a less polluting development path. Beyond political principles, there is the necessity to incorporate the decision making process of future CDM real actors. Regarding host country authorities, what is at stake is to bring in missing investment capacity to satisfy internal needs of goods and services, taking advantage of the additional inventive created by CDM certificates. For private investors, the objective is to maximize the global sum of commercial revenues plus CDM carbon income. The present paper examines potential CDM projects opportunities in the electric sector Quantified pre-simulations for the Tahumanu project, which consists in building a 3 x 2 200 kVA hydropower plant instead of subsidized diesel plants in the Bolivian Pando Province, and which is co financed by E7 as a CDM learning opportunity for seven large Annex 1 countries electricity companies, offer a realistic illustration possible CDM projects set up and arrangements with the host country. (authors)