Clean Development Mechanism (CDM)

  CDM - Objectives

CDM is also a project-based mechanism between developed and developing countries and projects can earn saleable Certified Emission Reduction (CER) credits.

  • To assist parties included in Annex I in achieving compliance with their quantified emission limitation and reduction commitments (greenhouse gas emission caps)
  •  The CDM allows industrialized countries to invest in emission reductions wherever it is cheapest globally

CDM – Kyoto Units

  tCER / lCER

Thereby CDM A/R projects can have a crediting period of either 20 years, with the possibility of two renewals up to 60 years total, or 30 years with no renewal

  Adaptation Fund

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

  CDM Criteria & Terminology

CDM Criteria

  • The participation of country governments of respective partners in the CDM is voluntary
  • The projects result in real, measurable, and long term benefits related to mitigation of climate change
  • The reductions in GHG emissions from the CDM project should be additional to any that would occur in the absence of the CDM

CDM Terminology

Baseline : CDM project activity is a hypothetical reference case, representing the volume of greenhouse gases  that would have been emitted if the project were not implemented. The baseline scenario describes the situation without the CDM project

Additionality : is the requirement that the greenhouse gas emissions after implementation of a CDM project activity are lower than those that would have occurred in the most plausible alternative scenario to the implementation of the CDM project activity. Registering a non-additional CDM project will result in no additional benefit for the climate and generate fake carbon credits that an Annex I country could use to avoid making real emission reductions domestically

Leakage : Leakage means that a project causes GHG effects outside its project boundaries.

Example : An area is being reforested. As a consequence, cattle ranging no longer can take place on this land. Now the owners of the cattle burn forest in another area to gain pastures for their cattle. The associated GHG effect needs to be taken into account.

  CDM Project Requirements

In order to participate in CDM, all countries must meet 3 basic requirements to :

  • ƒ Voluntarily participate in the CDM project
  • ƒ Ratify the Kyoto Protocol
  • ƒ Establish a National Authority to assess CDM projects

The Party hosting the project has met the participation requirements

  Designated National Authority

A designated national authority (DNA) is the body granted responsibility by a Party to authorise and approve participation in CDM projects

Establishment of a DNA is one of the requirements for participation by a Party in the CDM

The main task of the DNA is to assess potential CDM projects to determine whether they will assist the host country in achieving its sustainable development goals and to provide a letter of approval to project (host country approval) participants in CDM projects

It is then submitted to CDM Executive Board to support the registration of the project

  CDM Project Types

  Small CDM Projects

Small CDM Projects

All the projects under following category are considered as Small CDM Projects which have scope of bundling

  • Renewable Energy Project activities with a maximum output capacity equivalent to up to 15 megawatts (or an appropriate equivalent);
  • Energy efficiency improvement project activities which reduce energy consumption, on the supply and/or demand side, by up to the equivalent of 60 gigawatt hours per year; and
  • Other project activities that both reduce anthropogenic emissions by sources and directly emit less than 60 kilo tonnes of carbon dioxide equivalent annually

Small Scale A/R CDM Project (Aforstation and reforestation)

Small-scale projects may not generate more than a maximum 8000 t CO2 equivalent per annum on average over 5 years. Example: assuming an average net carbon sequestration of 10 tC/ha, this implies a maximum area of 218 ha of forest.

A main requirement for small-scale A/R projects is that they may be carried out only by low income individuals or low-income communities, as defined by the host countries. Small-scale A/R CDM project activities may not be the result of a de-bundled larger scale activity.

  CDM Project Types



Bundling is generally considered in the context of small-scale projects

Bringing together of several small-scale CDM project activities, to form a single CDM project activity or portfolio without the loss of distinctive characteristics of each project

Project activities wishing to be bundled must indicate this at the registration stage

All project activities to be included in a bundle must be submitted at the same time, and project activities cannot be withdrawn or added once projects are bundled, they cannot be debundled except in exceptional circumstances

Project activities within a single bundle must have the same crediting period

A request for registration must contain a form with information related to the bundle

  Crediting Period

The crediting period is the duration of time selected by the project participants during which the CDM project activity will be implemented and greenhouse gas emission reductions (and consequently certified emission reductions (CERs)) will be generated

The crediting period for a CDM project activity is selected by the project participants, and may be either:

  • 7-year crediting period, renewable twice; or
  • Single 10-year crediting period

  CDM CERs distribution by Countries