Clean Development Mechanism (CDM)

The Clean Development Mechanism (CDM) is one of three flexibility mechanisms created by the Kyoto Protocol in 1997. It allowed countries with emission reduction targets to fund mitigation projects in developing countries and receive Certified Emission Reductions (CERs), a type of carbon credit, in return to contribute towards their own targets.

How it worked

A CDM project, for example a renewable energy plant, a landfill methane capture project or an industrial energy efficiency upgrade, had to show it reduced emissions compared with what would have happened without it, the same additionality principle the carbon market still requires today. Once validated and verified by independent auditors and approved by the UN's CDM Executive Board, the project issued CERs that could be sold to governments or companies with reduction obligations under Kyoto, including the EU Emissions Trading System in its early phases.

Why it still matters

The CDM stopped issuing new credits after the second commitment period of the Kyoto Protocol ended, and its role has largely been taken over by the Paris Agreement, specifically the Article 6 mechanisms, and by voluntary carbon market standards such as the Verified Carbon Standard. Its legacy remains, though: many current methodologies for calculating emission reductions in renewable energy, waste management or energy efficiency projects build on methodologies originally developed for the CDM, and some historical CDM credits have been able to transition into the market under the Paris Agreement.

Lessons for today's carbon market

The CDM served as a large-scale testing ground for the carbon market: it helped develop emission calculation methodologies, third-party verification systems and credit registries, but it also exposed problems with questionable additionality and overestimated reductions in some projects, lessons that now inform the integrity criteria required by voluntary market standards and Article 6 of the Paris Agreement itself.

At Manglai we help you understand the context and quality of different carbon market mechanisms as you define your reduction and offsetting strategy. Discover how Manglai can help you.