The Clean Development Mechanism (CDM) is one of the flexibility mechanisms
defined in the Kyoto Protocol (IPCC, 2007) that provides for emissions
reduction projects which generate Certified Emission Reduction units which
may be traded in emissions trading schemes.
The CDM is defined in Article 12 of the Protocol, and is 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).
"Annex I" parties are those countries that are listed in Annex I of the
treaty, and are the industrialized countries. Non-Annex I parties are