Model results are useful but cannot account for many real world problems and unforeseeable events. Annex B trading can work even with heterogeneous domestic policies, but efficiency will be constrained and considerable cooperation by domestic authorities will be required. Project-level CDM activities may be quite valuable, but the potential of this approach is inherently limited by transaction costs and difficulties in defining and measuring certifiable emission reductions. Increasing the long-term willingness of developing countries eventually to join the current Annex B countries in binding emission limits will require capacity, technology, and resource transfers, as well as increased attention to equity. Flexibility mechanisms need to be markets, not bureaucracies.
Liability remains a complex issue and requires further experimentation.
Buyers and investors would also have a financial incentive to ensure the high quality and successful outcome of CDM projects, and third party insurers would emerge to manage risks. Less costly options than concrete supplementarity constraints on the flexibility mechanisms can and should de devised to address these concerns. Win-win solutions are real and should be advanced, especially in developing countries. If phased out, the result would be increased economic efficiency, cost savings to governments, potential air quality improvements in some cases, and GHG emission reductions. Such ancillary benefits include reductions in local air pollution, reductions in local water pollution and ecosystem protection.