Does the Clean Development Mechanism Exist in Developing Countries After an International Agreement?

The Kyoto Protocol is a key document on climate change agreements by the United Nations Framework on Climate Change. The latest commitments agreed in 2012. Its agreed to reduce CO2 emissions by about 20% or less of all global carbon emissions. A strong commitment is needed to reduce greenhouse gas emissions by governments from various countries. This study aims to figure out the progress of clean development mechanism of reducing CO2 emissions in the Asia and Middle East Region countries after the Kyoto Protocol Commitment. Variable CO2 emissions, economic growth, foreign direct investment, trade activities which covered from 2013 to 2017 were analysed using a panel data model. The alteration after agreement were evaluated using a Klassen Typology. The results show that economic growth and trading activities have a significant effect on clean development mechanism in Asia and the Middle East, but still have differences in the patterns and behavior of each country in implementing commitments to reduce CO2 emissions. Overall, attempts are needed to align economic growth with efforts to reduce emissions so that prudent policies are needed in forming realistic and sustainable mitigation and adaptation steps to address the problem of climate change.


INTRODUCTION
The issue of global warming has become an environmental issue that is much discussed because of its complexity. Global warming occurs due to increased greenhouse gas emissions in the earth's atmosphere. This greenhouse gas can actually come from nature itself, and can also come from human activities. Consumption and the use of very high technology results in increased concentration of emission in the atmosphere which results in climate change which impacts various sectors on economic development.
In economic development or other human anthropogenic activities, it couldn't be separated from the use of energy resources that produce residues, such as the release of CO 2 (CO 2 emissions). Based on the International Energy Agency's Report in July 2020, that the highest record global CO 2 emissions reached 33.5 GtCO 2 in 2018. The existence of CO 2 emissions greatly affects a country's economic growth (Borhan et al., (2012); Muhammad and Khan (2019); Rahman et al. (2020)). Mitigation efforts to reduce CO 2 emissions have been carried out since the Kyoto Protocol agreement in 1997 and continued monitoring in its implementation.
International agreements such as the Kyoto Protocol are considered economically disadvantageous. So, a tendency that is not easy for developed countries to ratify this agreement. Research conducted by (Kumazawa and Callaghan, 2012) found that carbon dioxide emissions decreased for industrialized countries and the effect of per capita income was much greater during these years since undersign of this international agreement. The emergence of a negative effect at that time, that is the decreasing scale of production, did not only occur in developed countries. The same condition also occurs in developing countries. That is the reason that some developed countries such as Russia, Japan, and Canada are reluctant to ratify the agreement.
Developed countries, which have persisted and agreed to ratify the Kyoto Protocol, believe that the most effective way to achieve this goal is to set specific targets for emission reductions and then use economic instruments (such as emissions trading and/ or carbon taxes) to help achieve these goals, in the most efficient way. Other countries, particularly developing countries, worried about the negative impact of direct emission reduction on the level of economic development and growth. So, they prefer to leave the open options and therefore do not agree to direct emission reductions (Truong, 2010). Several conditions in some countries after the Kyoto agreement were disclosed by Wang et al. (2019). CO 2 emissions in Taiwan have increased sharply in line with the rapid growth of the manufacturing industry. Only Germany was able to maintain the downward trend in earnings due to the EKC turning point during the financial crisis. Meanwhile, India shows a downward trend in income from the EKC turning point.
In the earlier of Kyoto Protocol 1997 to the end of the first period in 2012 has been abandoned by some countries such Russia, Japan, and Canada. Nevertheless, the optimism of the second Commitment in the period 2013-2020 for climate change mitigation efforts emerged with the signing of the Paris Agreement in 2015 as a result of the COP 21 st UNFCCC (Pramudianto, 2016). Paris Agreement has more flexibility when compared to the Kyoto Protocol's first commitment. In the first Kyoto Protocol, the total percentage of greenhouse gas emissions that must be reduced has been determined by about 20% or less of all global carbon emissions. Meanwhile, the Paris Agreement gives member countries the freedom to adjust their respective capabilities. Its concept called a Intended Nationally Determined Contribution (INDC), meaning that countries have the right to determine their own greenhouse gas production targets (Fa'iz, 2018).
Finding out the progress of clean development mechanisms to reduce CO 2 emissions in Asian and Middle Eastern countries after the Kyoto Protocol Commitment is the main objective of this study. This is urgent to conduct considering the Paris Agreement in 2015 which provides the widest possible opportunity for developing countries to participate in climate change mitigation measures by controlling the development of CO 2 emissions. How much progress has been made by developing countries is expected to furnish an overview of the commitment of developing countries in participating to reduce CO 2 emissions which cause climate change. In addition, the significant role of developing countries to reduce CO 2 emissions was also pointed out by (Grunewald and Martinez-Zarzoso, 2016) who stated although the Kyoto target was achieved by developed countries, it was only partially successful. Complete achievement to solve global warming can occur by integrating more countries into a commitment, including developing countries, to assert a tax of international carbon on GHG emissions. Therefore this research is significant as an evaluation of the agreement so that subsequently, strategic policies can be generated to minimize injurious effects, including the effects on international trade, as well as on the economy, especially in developing countries as parties affected by these emission flows from developed countries.
Furthermore, the systematics of this paper will discuss several previous studies that have been carried out to determine how the interaction patterns between carbon emission variables with every variable; economic growth, foreign investment, and exportsimports which are summarized in international trade. The next session is a research method that proposes the design, variables and analytical tools used, then followed by a discussion of the research findings and finally, the conclusion.

Studies with CO 2 Emission and Economic Growth
Economic growth plays a bigger role in contributing to CO 2 emissions (Chandran and Tang, 2013), (Jalil, 2014), (Balogh and Jámbor, 2017). Environmental studies often use CO 2 emissions as a representative of environmental quality. The relationship between CO 2 emissions and economic growth is often associated with the use of energy consumption in the process. The literature on environmental quality and studies of economic growth exist which focuses on examining the presence of the Kuznets Environmental Curve (EKC). Saboori and Sulaiman (2013) states Singapore and Thailand have a significant non-linear relationship in the long run between CO 2 emissions and economic growth, thus support Kuznets's hypothesis.
Hossain (2011) dan Hossain (2012) state although many findings of research in developed and developing countries show growth and energy consumption have a causal relationship, in real life, it is difficult to establish a relationship such as an inverted U curve. Several clusters of research findings; the first category is a one-way causality goes from CO 2 emissions to Economic Growth or vice versa, as happened in Africa (Ameyaw and Yao, (2018) ;Chontanawat, (2019). Second is the two-way relationship between output growth and energy used, as in South Asia (Rahman et al., 2020). The last is no causality relationship between economic development and CO 2 emissions. Different behavior is also shown by countries with high growth and countries with low growth on CO 2 emissions (Aye and Edoja, 2017).
Economic growth, environmental degradation, energy consumption and transportation, and population can empirically increase CO 2 emissions (Ben Abdallah et al., (2013); Mendonça et al. (2020); Ahmed et al. (2017)). However, if managed wisely, it can be used to increase energy efficiency. Policy makers can make efforts to reduce emissions such as planning sustainable urban transportation, increasing gas-fired vehicles and enacting laws to control the process through policies and strategies for low-carbon development.
Meanwhile, studies in 34 Asian countries show that CO 2 emissions affect economic growth. (Muhammad and Khan, 2019) found that there were differences in CO 2 emissions on economic growth between host countries and recipient countries. In Asia, CO 2 emissions have a positive and significant effect on the host country on economic growth in the recipient country. Meanwhile, government support in law enforcement and consciousness from citizens can affect the negative relationship between per capita income and CO 2 emissions (Arouri et al., 2012).

Studies with Carbon Emission and Foreign Direct Investment (FDI)
Carbon emission caused by foreign direct investment. It supported by (Shahbaz et al., 2019) and (Nasir et al., 2019) that find environmental degradation, which is a proxy for CO 2 emissions, has a long-term relationship with FDI in an economy. Furthermore, the negative effect of the large use of energy on the environment cannot directly vanish along in the process of economic development (Özokcu and Özdemir, 2017). Distinct results are shown by (Balogh and Jámbor, 2017) state that FDI and carbon emission has a negative impact. It exists if the foreign investment can bring technology more efficient compared with domestic investment.

Studies with CO 2 Emission and International Trade
Studies on CO 2 emissions has been developed, one is international trade as a production and consumption activity carried out in a country. Production activities are carried out as a step to produce output that can be traded to other regions or countries. Meanwhile, consumption activity shows how a country strives to meet its economic needs. Its the basis of trade between regions. These activities require energy consumption in their implementation. The higher energy consumption is required in the rapid economic, so the impact on the environment will be more pronounced. Moreover, the deindustrialization of developed countries that benefit developing countries causes a shift in pollutant activity to developing countries without reducing the consumption of manufactured goods in developed countries (Boitier, 2012). Hossain (2011) and Hossain (2012) state that income, energy used and trade are determinant of CO 2 emissions in Turkey. The finding of that study shows CO 2 emissions have been determinated not only by income and trade, but its influenced by energy consumption. Other result shows CO 2 emission, energy consumption, and foreign trade, lead an important part of Turkey's income level. Last, this study state that the transport process in open trade can produce CO 2 emissions. Exports result more CO 2 emissions than imports Exports are generated from the production process which produces residues from the use of resources. Import is an activity of consuming goods or output that uses resources and technology to bring it, for example the transportation process from the country of origin. The more output or commodity that is imported, the more impact it will have on the environment. Studies conducted in the European Union show that CO 2 emissions will be rise if country do more imports. Otherwise, carbon emission will be pull down with higher exports (Pié et al., 2018). Especially with the existence of trade integration (Ahmed et al., 2017). In addition, exporting countries, whose products are consumed are not responsible for the emissions produced, thus ignoring the emissions contained in trade (Fezzigna et al., 2019). That is why the influence of international trade is very important to be assessed as a crosscountry commitment and mitigation policies to reduce CO 2 .
Trade openness has negatively related to CO 2 emissions. Inline with Pollution Havens Hypothesis that states industries with pollution-intensive will shift to remote areas or developing countries which relatively have loose environmental standards when trade openness increases (Dong et al., 2019). Consequently, the country or region has very poor environmental quality.

Research Type and Design
This study employed a descriptive quantitative approach to describe a phenomenon. The Clean Development Mechanism is seen from the Influenced factors in CO 2 emissions. The panel data analysis was carried out by combining time-series data and cross-section data. Then, a classic typology model was employed to see differences in the development of an area; (Ai Munandar and Wardoyo, 2015), (Purnama and Mitomo, 2018). The indicator used was Economic Growth with Per Capita Income for the region. Further, Klassen Typology Approach was applied to seek the differences of clean development mechanism that conducted by a country's economic development is on the growth position of the CO 2 emissions produced.
In accordance with the development of Klassen Typological Approach, changes in economic growth and CO2 emissions can be classified into 4 quadrants ( Table 1) The secondary data were obtained from the International Energy Agency in 2020 and the World Development Report in 2020. Meanwhile, time-series data were taken from 2013 to 2017 due to in 2013 to 2020 is the time span in which the Dowa amendment, known as the second commitment period of the Kyoto Protocol, is enforced. The data from 27 countries in Asia (apart from China and Hong Kong) and the Middle East were used. The Asian region was chosen because the largest CO 2 emissions were generated from the Asian region, which reached 19 billion tones of CO 2 or 53% of world emissions in 2017. Several upper-middle-income countries in the region, such as Singapore, Bahrain, and Jordan, were selected as a comparison to the clean development mechanism which is carried out by developing countries.
In addition, more than 50% population in the globe lives in the Asian region. So, the CO 2 emission per capita is slightly lower than the average countries around the world. The Middle East region  (Boden et al., 2011).
Based on theoretical reviews and previous research, there are five variables to investigate. The dependent variable is CO 2 emissions then the growth of economy (EG), foreign direct investment, export and import are the independent variables. The research variables are shown in the Table 2.

Model Specifications
According to the theory, framework, and previous research, the research model can be written as eq (1) 2it Where as CO 2 , EG, FDI, EXP and IMP are respectively CO 2 emission (Mt), economic growth (%), foreign direct investment (million $), Export (million $), and import (million $). While α is coefficient; i referring to country (i = 1,2,3...26; and t is year -t (2013-2017); μ it is the sum of e+v i +w t , where as e is the common set of error, v i is the country-specific component, and w t the timespecific component.
In panel data analysis, common effects model, fixed effects model, and random effects model were applied. The common effects model assumes the data behavior of countries in the ASEAN region and the Middle East is similar over time. The ordinary least square approach or least-squares technique was carried out to estimate the panel data model (see eq (1)). Meanwhile, the fixed effects model assumes that there are differences between countries in the two regions observed from the differences in the intercept. Intercept differences were captured by entering dummy variables. Even though they have different interceptions, the slope is the same between countries. Fixed effects model estimation model is often referred to as the least squares dummy variable (LSDV) technique. The least squares dummy variable can be written as eq (2): The last approach is a random-effects model. In panel data, it is possible to have a linkage of the disturbance variables between individuals and over time. In a random-effects model, diverse interceptions will be patched by the error terms in every country.
To get random effects model, recall eq (2). However, α 0 is no longer fixed (nonstochastic) but random. It can be written as eq (5); where i = 1,2,…, n, α 0 � is an unknown parameter indicating the average intercept of the population. Meanwhile, ε i is a random disturbance variable to explain the differences in the behavior of countries.

Disturbance variables have characteristics
Therefore, it is formulated as follows: Equation (5) is substituted for equation (2)

Panel Data Estimation
After processing the data, comparisons can be made in determining the panel data analysis model, which is summarized in Table 3. In Therefore, by referring to the basic model in equation (2), then the final research model is made as in equation (8 The amount of intercept (θ it ) varies as presented in Table 4.

Klassen Typology Methods
Klassen Typology Methods was applied to figure out the circumstances of countries in Asia and the Middle East, related  to the attempted to harmonize the growth of economic and carbon emission. It also used to reinforce the finding of panel analysis. The result shows that at the end of the first commitment period in 2012, Malaysia, Thailand, India, Indonesia, Saudi Arabia were countries that had high economic growth and high carbon emissions. The quantity of CO 2 emissions and economic growth is above average; 175.84 metric ton per capita for CO 2 emissions and economic growth of 5.3% (Figure 1).
Countries in quadrant 2 mean that they have high economic growth in 2012 and low CO 2 emissions. They are Mongolia, Sri Lanka, Oman, Cambodia, Myanmar, Iraq Bangladesh, the Philippines, and Kuwait. Kuwait and Oman are countries that are in the highincome level but are able to have low CO 2 emission growth. While in the third quadrant there are Nepal, Qatar, Bahrain, Singapore, Jordan, Yemen, Lebanon, PRK, Brunei, Vietnam, United Arab Emirates, and Pakistan.
The results of Klassen Typology Approach shows that after the signing of the 2012 Dowa agreement, the countries classified in first quadrant 1 are Indonesia, Iran and Malaysia, and India. The average value of economic growth and CO2 emission was high from 2013-2017, exceeding the overall average value in the same time span, respectively 3.69 % and 196.25 metric tons per capita. Figure 2 illustrated the countries that are below the average score are Saudi Arabia and Thailand, thus in the fourth quadrant. The countries which have high growth of economy but low CO 2 emission, as well as the second quadrant are Mongolia, Sri Lanka, Cambodia, Myanmar, Pakistan Bangladesh, the Philippines, Vietnam, Nepal, Bahrain, and Iraq. Meanwhile, Qatar, Jordan, Lebanon, PRK, Brunei, Kuwait, Oman, United Arab Emirates, and Yemen Singapore are in the third quadrant with low economic growth and low CO 2 emission.
Prior to the 2012 Kyoto Protocol commitment, out of 26 countries in ASEAN and the Middle East, there were 9 countries (34.61%) having high economic growth rates and low CO 2 emissions. The nine countries are Mongolia, Sri Lanka, Oman, Cambodia, Myanmar, Iraq, Bangladesh, the Philippines, and Kuwait. After signing commitment 2, during the period from 2013 to 2017, the number of countries with high economic growth rates but low CO 2 emission levels increased by 22% to 11 countries in which there were four classified into this category; Nepal, Bahrain, Vietnam, and Pakistan.

DISCUSSION
Environmental degradation is dominated by upper middle income and high-income countries such as Malaysia, Indonesia, Iran, Saudi Arabia, Thailand, and India. There is a quite huge expectation on the role of these countries in mitigating emission reduction. India and Indonesia, although not in the Annex I category, are included in the category of leading emmiters. The results of the study is that it has a high level of economic growth but its CO 2 emissions are still high, which is above the average of 3.69. This shows that the existing growth process is not efficient and environmentally friendly due to high pollutants produced in the development process for economic growth. High CO 2 emissions occur because activities, such as investment, can move economic growth and it will require large energy consumption ( 2019)). The findings shows that Malaysia, Indonesia, Iran, Saudi Arabia, Thailand, and India have large intercept values. Its confirmed by Bhat and Mishra (2018) that energy consumption and free trade can increase CO 2 emissions in India. Meanwhile, for developing countries that benefited from geographic location and rely a lot on the agricultural sector, CO 2 emissions could be minimized. Study Wang et al. (2019) states that CO 2 emissions tend to be high in countries that are the industrialbased economy, while India, which represents developing countries, is found to have the ability to reduce emissions by relying on low carbon-based industry. One of the reasons developed countries have a more prominent tendency of pollution concentration and inefficiency is temporary mismanagement in developing countries because of technological gaps (Soares et al., 2018). The data also illustrate that Oman and Kuwait, despite their commitment to keeping CO 2 emissions low, their average economic growth in 2013-2017 was not considered good. Hence, to tackle this kind of issue, an effective policy should be made to keep CO 2 emission low without affecting its competitiveness. Otherwise, it will affect economic development in the long term.
The Clean Development Mechanism process at least has occurred in several developing countries. CO 2 emission is always produced when economic activities occur. A strong commitment is required to reduce CO 2 emissions which must be aligned with the goal of increasing economic growth. Some countries such as Bahrain, to maintain a stable level of economic growth even though they can maintain the emissions low. Currently, Oman and Kuwait have a responsibility that by 2030, they will reduce 2% of GHG emissions and have a target to reduce approximately 23 million tons by 2035. Absolutely, It requires an appropriate strategy so that it can still focus on increasing economic growth and technological reform, but on the other hand diversify energy with fewer hydrocarbons (Charabi et al., 2018).
Reducing carbon emission takes a big effort and sometimes the policies in economic activities have an externality to the environment. For example, Oman is making a policy to fulfill local domestic needs by producing its own oil refinery. As a consequence, it can reduce imports of these products, but domestic carbon emissions increase due to higher consumption of fossil and liquefied natural gas. (Abdul-Wahab et al., 2015). Saudi Arabia (KSA) leads the Gulf Cooperation Council (GCC) on the biggest CO 2 emissions. During its development, KSA CO 2 emissions have grown rapidly since 2005 caused by the increasing demand for world oil, the high demand for electricity generation for industrial development in the country (Qader, 2009). Like several countries that depend on hydrocarbon production, KSA also ratified the Kyoto protocol in 2005, but it seems difficult for KSA to reduce its CO 2 emissions.

CONCLUSION
This paper aims to seek the commitment of developing countries, especially in Asia and the Middle East region, to bring down CO 2 emissions following the second Kyoto Protocol. Overall, until the end of 2017, there has not been huge change compared to the end of period 1 of the year 2012. The findings indicate that Indonesia, Iran, Malaysia, and India still need to develop mitigation policies to align economic growth with CO 2 emissions.
It is reported that Malaysia, India, and Indonesia have a high average economic growth, but also have a high growth rate of CO 2 emissions. Even Thailand and Saudi Arabia experienced a shift with an average CO 2 emission that was still high, but the average growth rate decreased in the 2013-2017 time period. Therefore, monitoring and supervision are required to evaluate the commitments of these countries on the Kyoto Protocol or other multilateral agreements. This step has actually been initiated with the existence of the APAEC (ASEAN Plan of Action for Energy Cooperation) in the ASEAN Region or RCREEE (The Regional Center for Renewable Energy and Energy Efficiency) in Pan-Arab countries. Both have a common goal that is to ensure the implementation of a sustainable future of energy or cost-effective renewable energy. The struggle to make a shift towards changing the structure of the economy which is oriented towards a more ecological modernization is considered not easy. This condition occurs in several Middle Eastern countries (Arouri et al., 2012).
The result of the study shows that foreign direct investment and export-import trade activities play vital roles in development. Nonetheless, the government is expected to be aware of their decision related to strategic national policies or regulations as operational standards. Hence, the incoming investment or output flows can be directed towards technology that is environmentally friendly and yet somehow efficient to achieve sustainable development goals. The achievement of clean development mechanism requires cooperation between Annex I countries and non-Annex I countries in order to fulfill their emission reduction obligations through investment in emission reduction projects and carbon trading. A more comprehensive policy and strategy as a clean development mechanism of emission reduction after the Dowa agreement can be obtained by conducting further research in many countries or inter-regional because each area must have its own treatment in dealing with climate change, especially CO 2 reduction. In addition, the using of more specific variables from investment and technological innovations in developing countries to reduce carbon dioxide emissions, hopefully can be used as a more efficient evaluation material related to the clean development mechanism process.