The Clean Development Mechanism (CDM) is one of the flexible mechanisms under the Kyoto Protocol. The Certified Emission Reductions (CERs) generated by CDM projects, which reduce GHG emissions in countries where there is no emission cap under the Kyoto Protocol (Non-Annex I countries), may be used by countries with emission reduction commitments (Annex I country).
Through the CDM project cooperation between annex I and non-annex I countries (e.g. project types of hydro, wind, biomass…), a win-win situation will be realized in a cost-effective way. On one hand the industrialized countries can utilize the bought CERs for their compliance use to fulfill their emission reduction commitments under the Kyoto Protocol. On the other hand, the non-annex I countries can gain additional investment and make profits by selling CERs issued from the projects.
Important host countries for CDM-projects are China, India, Mexico or Brazil. As a non-annex I country, China does not have the obligation to meet certain emission reduction commitments under the Kyoto Protocol. Therefore, the GHG emission reduction projects based in China can be developed into CDM projects. By implementing CDM projects, the Chinese companies can gain a lot of additional financial support. By 16th January 2012, there are totally 1785 Chinese CDM projects successfully registered at CDM EB (Executive Board). Chinese projects account for 47.02% of all the registered CDM projects and are expected to generate about 360 million CERs annually, which take up 63.94% of the global CDM market share.
The CDM mechanism is aimed to encourage companies to participate in emission reduction projects. To make a CDM project registered at EB and to get CERs finally issued, two or more countries and intermediary entities will be involved in the whole project development and management process. CDM projects are based on globally unified regulations and have especially the following characteristics:
– Project participates take part in CDM projects voluntarily
– Projects should contribute to the sustainable development in the non-annex I country
– Emission reduction is consistent, real and measurable
– Emission reduction is additional to any that in the absence of the CDM project
Climate Corporation manages a fast growing CDM project pipeline of currently more than 50 CDM projects which are expected to deliver millions of CERs in the Kyoto as well as the post Kyoto period. Recently Climate Corporation focussed on the CDM markets in Africa and other least developed countries (LDCs) as well as the emerging CFI market in Australia.