The Clean Development Mechanism (CDM)

The CDM allows countries with emissions caps under the Kyoto Protocol to meet their emission reduction requirements via the purchase of carbon offsets from CDM projects. The CDM is administered by the UNFCCC.

Each CDM project registers the quantities of greenhouse gases reduced relative to business as usual conditions; for each tonne of CO2-e greenhouse gas reduced, the project entity is awarded a carbon offset (named a Certified Emission Reduction, or CER).

The CDM was designed to enhance sustainable development and technology transfer for developing countries. It also allows the Carbon Market to harvest all of the ‘low hanging fruit’, as it is cheaper and easier to reduce a tonne of greenhouse gas in a developing country than in a developed one.

CDM projects must be additional; that is, they must go beyond business as usual activities. An example of eligible projects under the CDM include:

• Renewable/Biofuel Energy Projects
• Energy efficiency projects
• Avoided methane emissions (through flaring or capture and use)
• Tree planting projects and land use changes
• Removal of HFCs and CFCs from refrigerant units
• Reduction of Nitrous Oxides (N2O) in manufacturing and agriculture

Additionality is an important feature of CDM project activities, as it ensures that projects create real reductions in CO2 levels within the earth’s atmosphere. Each project must prove that it needs added revenue from the CDM to ensure that it passes investment hurdles and that it would not have occurred as part of a business as usual proposition. Projects can also prove additionality on the basis that they require funding to overcome social barriers.

CDM projects are registered through the United Nations CDM Executive Board accreditation processes. In order to pass through the CDM Board’s requirements, the carbon savings from the project must not have occurred in the absence of the project (as described above); be measurable and verifiable.

Contact us if you believe you have a project opportunity that can create carbon offsets under the Clean Development Mechanism.