Location of Repository

Determining Project-Based Emissions Baselines with Incomplete Information

By Carolyn Fischer


Project-based mechanisms for emissions reductions credits, like the Clean Development Mechanism, pose important challenges for policy design because of several inherent characteristics. Participation is voluntary. Evaluating reductions requires assigning a baseline for a counterfactual that cannot be measured. Some investments have both economic and environmental benefits and might occur anyway. Uncertainty surrounds both emissions and investment returns. Parties to the project are likely to have more information than the certifying authority. The certifying agent is limited in its ability to design a contract that would reveal investment intentions. As a result, rules for baseline determination may be systematically biased to overallocate, and they also risk creating inefficient investment incentives. This paper evaluates, in a situation with asymmetric information, the efficacy of the main baseline rules currently under consideration: historical emissions, average industry emissions, and expected emissions.climate policy, Clean Development Mechanism, baseline emissions, asymmetric information

OAI identifier:

Suggested articles



  1. (1999). (Self-) Enforcement of Joint Implementation and Clean Development Mechanism Contracts. Fondazione Eni Enrico Mattei Note di Lavoro:
  2. (1979). A Decentralized Method of Utility Regulation.
  3. (1993). A Theory of Incentives in Procurement and Regulation.
  4. (2001). Bargaining Institutions under the Clean Development Mechanism. Mimeo. Paris: CIRED. Resources for the Future Fischer
  5. (2001). Is There a Rationale for Rebating Environmental Levies? RFF Discussion Paper 01-31. Washington, DC: Resources for the Future.
  6. (2001). Modalities and Procedures for a Clean Development Mechanism, as Defined
  7. (1994). On the Feasibility of Joint Implementation of Carbon Emissions Reductions.
  8. (2001). Rebating Environmental Policy Revenues: Output-Based Allocations and Tradable Performance Standards. RFF Discussion Paper 01-22. Washington, DC: Resources for the Future.
  9. (1988). The Theory of Environmental Policy, 2 nd Ed.

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.