CDM & The Kyoto Protocol

The Clean Development Mechanism (CDM), introduced during the Kyoto Protocol conference in December 1997, enables emissions credits to be awarded to investor companies from Annex I countries of the United Nations Framework Convention on Climate Change (UNFCCC), in CDM projects which reduce greenhouse gas emissions in developing countries (countries which are not listed in Annex I, for the functioning of this mechanism). These emissions credits can be sold to any company belonging to countries listed in Annex B of the Kyoto Protocol, or used by the investor company to meet its own emissions targets in the home country.

The Clean Development Mechanism (CDM) of the Kyoto Protocol is one of the key initiatives developed by the United Nations Framework Convention on Climate Change (UNFCCC) in its declaration of the Kyoto Protocol in December 1997. The Protocol provides a broad-based proposal to mitigate the effects of global warming.

Reductions of greenhouse gas emissions (GHGs) can be quantified in terms of carbon credits accruing to a project, if these carbon credits were verified and certified by agencies approved by the CDM Executive Board (EB). The EB is a panel of experts overseeing the implementation of the CDM. The carbon credits represent financial value to the project host country that has acceded to the Kyoto Protocol. The conditions that each CDM project has to comply with in order to effectively generate carbon credits are specified in UNFCCC's website, www.unfccc.int. Generally, the net financial return to investors of a CDM project could range between 3 and 12 percent on investment, after having subtracted the cost of certification of possible carbon credits and other related costs.

Small Scale CDM Project

A project which is eligible to be considered as a small scale CDM project activity can benefit from the simplified modalities and procedures, which were adopted by the COP/MOP at its first session Simplified modalities and procedures for small-scale clean development mechanism project activities (735 KB) (decision 4/CMP.1, Annex II). Note that  decision 2/CMP.3 (Further guidance relating to the clean development mechanism) (48 KB) revises the definitions for small-scale CDM project activities referred to in paragraph 6 (c) of decision 17/CP.7.