A clean development mechanism is hereby defined.
The clean development mechanism (CDM) is a project-based mechanism under the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC) that enables the generation and issuance of certified emission reductions (CERs) from eligible CDM project activities.
Project activities under the CDM must be:
- hosted by non-Annex I Parties (host Parties) that have ratified the Kyoto Protocol and established a designated national authority (DNA);
- developed by public or private entities authorised by the relevant host Party and Annex I Party involved in the project activity; and
- validated by a designated operational entity (DOE) in accordance with the CDM project eligibility and participation requirements, including the use of an approved baseline and monitoring methodology;
- registered by the CDM Executive Board after review by a Registration and Issuance Team to ensure compliance with the international rules; and
- once commissioned and operational, verified and certified by a DOE as resulting in real, additional, measurable and verifiable reductions in greenhouse gas emissions below an approved business as usual baseline scenario.
CERs issued by the Executive Board are sold and purchased under private commercial arrangements between the project participants for the sale and purchase of the CERs and forwarded and transferred between Annex I Parties - and the public and private entities authorised by those Parties - via the international transaction log (ITL), established under the international emissions trading mechanism of the Kyoto Protocol.
CERs can then be used along side other Kyoto credits to satisfy Parties' legally binding quantified emission limitation and reduction commitments (often referred to as 'Kyoto targets').