Clean Development Mechanism

With the adoption of the Kyoto Protocol in 1997 came a new international regime, managed by the United Nations Framework Convention on Climate Change (UNFCCC), dedicated to coordinating global action on climate change. The UN established greenhouse gas emission reduction targets for industrialized countries, and at a subsequent meeting a set of three flexible market-based mechanisms were developed to enable these countries to reduce their emissions in more cost-efficient ways.

 

Of the newly established market-based mechanisms, the Clean Development Mechanism (CDM) was of direct relevance to Africa, as it established a system whereby emission reduction targets in industrialised countries could be in part met by purchase of ‘credits’ from environmentally sustainable projects in developing countries. 

In this system, environmentally ‘clean’ projects in developing countries certify the amount of greenhouse gas emissions they reduce and then sell this certified reduction (also known as a ‘credit’ or ‘offset’) to industrialised countries. Global emissions reductions are achieved, while developing countries earn money for environmentally clean actions such as developing renewable energy resources or adopting sustainable land management practices. 

 

The carbon credit is a market instrument that can be bought and sold like any other. The market for primary (project-based) CDM carbon credits has grown to nearly $7 billion globally, and represents a major vehicle for developing countries seeking to finance the shift to a low-carbon economic trajectory.