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This article assesses the effectiveness of the Kyoto Protocol’s Clean Development Mechanism (CDM) in meeting its twin aims of emission reductions and sustainable development. To date, the CDM has failed to achieve these goals. This article argues that the CDM’s shortcomings are due to path dependence, with the CDM stuck at a suboptimal equilibrium of insufficient institutions, capital and leadership. A reform scheme involving foreign direct investment, foreign aid and CDM amendments is prescribed for pushing the CDM to a more efficient and prosperous path. A properly functioning CDM would afford both developed and developing countries the opportunity to secure a more sustainable economic and environmental future.

The Odd Couple: Uniting Climate Change Mitigation and Sustainable Development under the Clean Development Mechanism