Internationale Politikanalyse International Policy Analysis Hans-Jochen Luhmann and Wolfgang Sterk Climate targets – should they be met at home or where it is cheapest? The“clean development mechanism” as generator of investment from inside the climate regime „ The Kyoto Protocol’s emissions trade mechanisms permit individual in­dustrialized countries to purchase reductions in other countries and count them towards their own Kyoto emissions targets. Originally conceived as a limited safety valve for overburdened industrialized countries the emis­sions trade has come to be regarded by many as the central mechanism for North-South financial transfers, and one which should be extended. „ However, the idea that support should be provided primarily by means of the emissions trade conflicts with environmental requirements: It undermines the framework conditions necessary for the requisite environ­mental innovations and the stemming of climate change requires, not only in the North, but also in the South, considerable emissions reductions by 2050, not merely restrictions. The question arises, how it can be achieved, in the longer term, that the South, alongside its own reductions, continues to satisfy the North’s considerable demand for emissions rights. „ Emissions trade must be tailored in such a way that there is still suffi­cient pressure for innovation. Only then will there be any prospect that the concept of“environmental industrial policy” will achieve what it is capable of. That is, if support for Southern states is to be organized by means of the emissions trade market it must, in contrast to previous measures, take place in addition to domestic reductions in order to maintain the pressure for innovation. JULY 2008