The Clean Development Mechanism (CDM)

The Clean Development Mechanism (CDM) is one of the Flexible Mechanisms defined in the Kyoto Protocol (IPCC, 2007) that provides for emissions reduction projects which generate Certified Emission Reduction units (CERs) which may be traded in emissions trading schemes.^[1]

The CDM, defined in Article 12 of the Protocol, was intended to meet two objectives:

• (1) to assist parties not included in Annex I in achieving sustainable development and in contributing to the ultimate objective of the United Nations Framework Convention on Climate Change (UNFCCC), which is to prevent dangerous climate change; and
• (2) to assist parties included in Annex I in achieving compliance with their quantified emission limitation and reduction commitments (greenhouse gas (GHG) emission caps).^[2]

"Annex I" parties are the countries listed in Annex I of the treaty, the industrialized countries. Non-Annex I parties are developing countries.

The CDM addresses the second objective by allowing the Annex I countries to meet part of their emission reduction commitments under the Kyoto Protocol by buying Certified Emission Reduction units from CDM emission reduction projects in developing countries (Carbon Trust, 2009, p. 14).^[3] Both the projects and the issue of CERs units are subject to approval to ensure that these emission reductions are real and "additional." The CDM is supervised by the CDM Executive Board (CDM EB) under the guidance of the Conference of the Parties (COP/MOP) of the United Nations Framework Convention on Climate Change (UNFCCC).

The CDM allows industrialized countries to buy CERs and to invest in emission reductions where it is cheapest globally (Grubb, 2003, p. 159).^[4] Between 2001, which was the first year CDM projects could be registered and 7 September 2012, the CDM issued 1 billion Certified Emission Reduction units.^[5] As of 1 June 2013, 57% of all CERs had been issued for projects based on destroying either HFC-23 (38%) or N₂O (19%).^[6] Carbon capture and storage (CCS) was included in the CDM carbon offsetting scheme in December 2011.^[7]

However, a number of weaknesses of the CDM have been identified (World Bank, 2010, p. 265-267)^{[full citation needed]}. Several of these issues were addressed by the new Program of Activities (PoA), which moves to approving 'bundles' of projects instead of accrediting each project individually. In 2012, the report Climate Change, Carbon Markets and the CDM: A Call to Action said governments urgently needed to address the future of the CDM. It suggested the CDM was in danger of collapse because of the low price of carbon and the failure of governments to guarantee its existence into the future. Writing on the website of the Climate & Development Knowledge Network, Yolanda Kakabadse, a member of the investigating panel for the report and founder of Fundación Futuro Latinamericano, said a strong CDM is needed to support the political consensus essential for future climate progress. "Therefore we must do everything in our hands to keep it working," she said

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What is the clean development mechanism?

The CDM allows emission-reduction projects in developing countries to earn certified emission reduction (CER) credits, each equivalent to one tonne of CO2. These CERs can be traded and sold, and used by industrialized countries to a meet a part of their emission reduction targets under the Kyoto Protocol.

The mechanism stimulates sustainable development and emission reductions, while giving industrialized countries some flexibility in how they meet their emission reduction limitation targets.

The CDM is the main source of income for the UNFCCC Adaptation Fund, which was established to finance adaptation projects and programmes in developing country Parties to the Kyoto Protocol that are particularly vulnerable to the adverse effects of climate change. The Adaptation Fund is financed by a 2% levy on CERs issued by the CDM. more »

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The clean development mechanism was designed to meet a dual objective:

• to help developed countries fulfill their commitments to reduce emissions, and
• to assist developing countries in achieving sustainable development.

CDM projects earn tradable, saleable certified emission reduction (CER) credits that can be used by industrialised countries to meet a part of their emission reduction targets under the Kyoto Protocol.

Benefits of CDM projects include investment in climate change mitigation projects in developing countries, transfer or diffusion of technology in the host countries, as well as improvement in the livelihood of communities through the creation of employment or increased economic activity. This page serves to highlight where, how and what has been the impact of the CDM across the globe.