Article 6 of the Kyoto Protocol allows an Annex I country to contribute to the

implementation of a project to reduce emissions (or enhance a sink) in another Annex I

country and to receive emission reduction units (ERUs) equal to part or all of the emission
reduction (sink enhancement) achieved. The ERUs received by the investor country can be
used to help meet its national emissions limitation commitment.

The Clean Development Mechanism (CDM) is one of the Flexible Mechanisms defined in
the Kyoto Protocol (IPCC, 2007). The flexibility mechanisms were designed to allow
Annex B countries to meet their emission reduction commitments with reduced impact on
their economies (IPCC, 2007). The flexibility mechanisms were introduced into the Kyoto
Protocol by the US government. Developing countries were highly skeptical and fiercely
opposed to the flexibility mechanisms (Carbon Trust, 2009, p. 6). However, the international
negotiations over the follow-up to the Kyoto Protocol agreed that the mechanisms will
continue.

It provides for emissions reduction projects which generate Certified Emission

Reduction units (CERs) which may be traded in emissions trading schemes

The CDM, defined in Article 12 of the Protocol, was 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).
The CDM addresses the second objective by allowing the Annex I countries to meet part of
their emission reduction commitments under the Kyoto Protocol by buying Certified
Emission Reduction units from CDM emission reduction projects in developing countries.

Both the projects and the issue of CERs units are subject to approval to ensure that these
emission reductions are real and "additional." The CDM is supervised by the CDM Executive
Board (CDM EB) under the guidance of the Conference of the Parties (COP/MOP) of the
United Nations Framework Convention on Climate Change (UNFCCC).

The CDM allows industrialized countries to buy CERs and to invest in emission reductions
where it is cheapest globally.
Between 2001, which was the first year CDM projects could be registered and 7 September
2012, the CDM issued 1 billion Certified Emission Reduction units (CERs). As of 1 June
2013, 57% of all CERs had been issued for projects based on destroying either HFC-23
(38%) or N2O (19%). Carbon capture and storage (CCS) was included in the CDM carbon
offsetting scheme in December 2011.

The purpose of the CDM is to promote clean development in developing countries, i.e., the
"non-Annex I" countries (countries that aren't listed in Annex I of the Framework
Convention). The CDM is one of the Protocol's "project-based" mechanisms, in that the
CDM is designed to promote projects that reduce emissions. The CDM is based on the idea
of emission reduction "production" (Toth et al., 2001, p. 660).[9] These reductions are
"produced" and then subtracted against a hypothetical "baseline" of emissions. The baseline
emissions are the emissions that are predicted to occur in the absence of a particular CDM
project. CDM projects are "credited" against this baseline, in the sense that developing
countries gain credit for producing these emission cuts.

The economic basis for including developing countries in efforts to reduce emissions is that
emission cuts are thought to be less expensive in developing countries than developed
countries (Goldemberg et al., 1996, p. 30;[10] Grubb, 2003, p. 159).[4] For example, in
developing countries, environmental regulation is generally weaker than it is in developed
countries (Sathaye et al., 2001, p. 387-389). Thus, it is widely thought that there is greater
potential for developing countries to reduce their emissions than developed countries.

The CDM is designed to start developing countries off on a path towards less pollution,
with industrialised (Annex B) countries paying for the reductions.

There were two main concerns about the CDM (Carbon Trust, 2009, pp. 14–15). One was
over the additionality of emission reductions produced by the CDM (see the section on
additionality). The other was whether it would allow rich, northern countries, and in
particular, companies, to impose projects that were contrary to the development interests of
host countries. To alleviate this concern, the CDM requires host countries to confirm that
CDM projects contribute to their own sustainable development. International rules also
prohibit credits for some kinds of activities, notably nuclear power and avoided deforestation.
 Commitment Total
Commitment Period 2
Period 1

CERs 1,477,852,932 474,653,470 1,952,506,402

issued for
PA

CERs 1,735,882 12,913,560 14,649,442

issued for
PoA

Total 1,479,588,814 487,567,030 1,967,155,844

Number of ♦Potential supply of:

CDM project
activities ♥CERs issued ♣CERs to the end of the CERs to the CERs to the end of CERs to the end
that have end of 2018 2020 of all current
issued 1stKP commitment
(KP1) period (31 Dec. 2012) crediting periods
CERs:

♠3,146 1,943,393,170 1,483,025,656 4,104,840,352 4,585,312,820 4,966,751,562

(1,481,019,600)

♠Adjusted by past rate of 1,956,467,200 2,185,472,000 2,367,275,008

issuance

india's first Clean Development Mechanism (cdm) project under Kyoto

Protocol (kp) , the global pact to fight climate change, has been approved.
Refrigerant-gas manufacturer Gujarat Fluoro-Chemicals (gfl),based in Vadodara,
Gujarat, has become the first Indian company and the third in the world to have an
emission-reduction cdm project certified by the cdm executive board , established
under kp. cdm allows developed nations to achieve their greenhouse
gas (ghg) emission reduction targets, set by kp , by investing in clean projects in
developing countries. Companies can trade carbon emissions like a commodity.

gfl makes hcfc22, a coolant used in air-conditioning and refrigeration

applications. hfc 23, another flurochemical and a potent ghg, is generated as a by-
product. gfl's cdm initiative involves adapting an eco-friendly process to
ensure hfc 23 is not emitted.

gfl will sell its carbon emission reductions (cers), with one cer equivalent to the
reduction of a tonne of carbon dioxide. It is likely to generate three million cer s
annually and make anything upwards of us $21 million (Rs 92.4 crore) a year, says
Deepak Asher, vice president (corporate finance), gfl. Media reports said gfl has
entered into deals to sell cers to the uk in 2005-06 and to the Netherlands in 2006-
07 at us $13.5 per tonne and us$18.9 per tonne, respectively. "At present the
average rate of cer is us$9. This is very less, as sellers are not informed about the
market and buyers are not well established," says Dinesh Babu, head, climate
change, Asia Carbon International bv, Singapore, a company working
on kpmechanisms.

26.8% of projects - 3330 projects in India

1105 – wind power

732 – biofuel and biomass

508 – Energy efficiency and fuel switch

331 - Hydropower

36 – Cement Projects

27 – Afforestation and reforestation