The Clean Development Mechanism ("CDM") is a scheme that was established following the introduction of the emission trading arrangements under the Kyoto Protocol ("Kyoto"). Kyoto established greenhouse gas emission targets for those Annex I countries that ratified the protocol. Targets could be met through a combination of national mitigation actions and the implementation of projects in foreign jurisdictions (who have also ratified Kyoto), with the emission reductions achieved 'imported' to meet an Annex I country's commitments. The CDM allows the generation of emission reductions through projects in developing countries that can be used to meet Annex I country commitments.
The CDM was one of the more successful Kyoto measures, with over 7,500 projects registered across multiple developing countries, and a significant number of methodologies developed for the measuring, reporting and verification of emission reductions from different technologies. Projects located in developing countries and generating emission reductions under an approved methodology can register under the CDM, and will be issued with Certified Emission Reductions ("CERs") in respect of each tonne of carbon dioxide equivalent that was saved once the project is operational. CERs have a market value, which has been principally driven through the ability of EU ETS participants to use the credits as part of their compliance, but also from Annex I countries as part of meeting their Kyoto targets (through supplementing Assigned Amount Units ("AAUs")) or for voluntary emission reductions. The provisions of the Kyoto protocol expired in 2012 and whilst the CDM has continued to operate for projects registered before this time, the number of new projects registering has significantly decreased.
The CDM is administered by the United Nations Framework Convention on Climate Change ("UNFCCC"). More information can be found here
Region / Country: International
