Clean Development Mechanism (CDM)

• Country Profiles
• CDM Project Development
• CDM Financing Schemes
• Business Opportunities for ETS Companies at CDM Markets
• How to find a Project Partner
• Overview of Certificate Types (July 2007)
• Emissions Trading (July 2007)

In order to prevent climate change, the emissions of greenhouse gases must be reduced significantly. The Kyoto Protocol, signed in 1997 under the United Nations Framework Convention on Climate Change, is the first joint action between the industrialized and developing countries, to reduce emissions of greenhouse gases.

The Protocol sets out emission reduction targets for emissions of greenhouse gases from industrialized countries and countries in transition (Annex 1 countries), whilst at the same time allowing developing countries (non-Annex 1 countries) to take part in emission reduction initiatives on a voluntary basis. The Clean Development Mechanism (CDM) as one of the flexible mechanisms under the Kyoto Protocol provides Annex 1 countries with the opportunity of reducing the overall costs of complying with its Kyoto obligations whilst providing a portal for the developing countries to participate in the international climate change activities on a voluntary basis.

This is done by allowing credits generated from greenhouse gas emission reduction activities in developing countries to be purchased by Annex 1 countries, to comply with their emission reduction target. At the same time CDM projects must deliver sustainable development, impacts in the host country that go beyond pure emission reductions to support the countries improve their current development patterns.

The link between this dual objective of the CDM is the generation of carbon credits (Certified Emission Reductions – CER) as a tradable commodity that is provided by the project activity in return for new revenue streams and support in kind of transfer and diffusion of environmentally-friendly technologies. Provided that projects fulfil the eligibility requirements, as set out in the Kyoto Protocol, and subsequently refined in later negotiations, there exist good opportunities for establishing new business cooperation and trading of carbon credits under the CDM.