The Clean Development Mechanism (CDM), provided for under Article 12 of the Kyoto
Protocol, enables developing countries to participate in joint greenhouse gas (GHG)
mitigation projects. Under this Protocol, Annex I countries (developed
countries and economies in transition) are required to reduce GHG emissions to below their
The CDM enables these countries to meet their
reduction commitments in a flexible and cost-effective manner. It allows public or private
sector entities in Annex I countries to invest in GHG mitigation projects in developing
countries. In return the investing parties receive credits or certified emission
reductions (CERs) which they can use to meet their targets under the Kyoto Protocol.
While investors profit from CDM projects by
obtaining reductions at costs lower than in their own countries, the gains to the
developing country host parties are in the form of finance, technology, and sustainable
The basic rules for the functioning of the CDM were agreed on at the seventh Conference of Parties (COP-7) to the
UNFCCC held in Marrakesh, Morocco in October-November 2001. Projects starting in the year
2000 are eligible to earn CERs if they lead to "real, measurable, and long-term"
GHG reductions, which are additional to any that would occur in the absence of the CDM
project. This includes afforestation and reforestation projects, which lead to the
sequestration of carbon dioxide.
At COP-7, it was decided that the following types of projects would qualify for fast-track
energy projects with output capacity up to 15 MW
efficiency improvement projects which reduce energy consumption on the supply and/or
demand side by up to 15 GWh annually
project activities that both reduce emissions by sources and directly emit less than 15 kt
CO2 equivalent annually.
The CDM will be supervised by an executive board, and a share of the proceeds from project
activities will be used to assist developing countries in meeting the costs of adaptation
to climate change.