Do bilateral trade relationships influence the distribution of CDM projects?

Clean Development Mechanism (CDM) is increasingly widespread in developing countries. As a matter of fact, CDM projects are still far from being an effective development action, since the strongly uneven distribution of these projects in a few not so poor economies reveals the existence of an important failure. This paper contributes to this issue by analysing one potential cause of the CDM geographical concentration related to trade relationships. By applying a gravity model to a panel dataset, well-established export flows from developed economies towards developing countries explain a large portion of the geographical distribution of CDM projects. The main policy implication is that a sort of lock-in effect in the CDM relationship should be avoided by enhancing the institutional framework in developing countries hosting CDMs as well as by reinforcing compulsory rules for CDM destination toward the least developed economies.