The Clean Development Mechanism (CDM) is a project-based system extablished by the Kyoto Protocol to achieve cost-effective solutions to mitigate greenhouse gases.  A CDM project is undertaken in a developing country that has not been assigned any emissions reductions target.  Emissions reductions, called Certified Emissions Reductions, or CERs, generated by any emission reduction project can be sold to developed countries (called Annex 1 countries) that are required to reduce emissions and authorized companies.

The CDM has two major goals:

• To assist Annex 1 countries in reaching their emissions reduction targets.
• To promote sustainable development objectives in the developing countries (Non-Annex I countries).

Emissions reductions that developing countries create as CERs can be used by industrialized countries to offset or reduce their national targets.  In order to be eligible for the CDM, a project must satisfy two important criteria:  additionality and sustainable development:

• The emission reductions of the project must be in addition to those that would occur under a "business as usual" scenario.  It is not sufficient for a project just to reduce emissions; it must reduce emissions as a result of actions that would not have been made in a "business as usual" case.
• CDM projeccts must lead to real, measurable, and long-term benefits in terms of climate change mitigation.  The purpose of the CDM is to contribute to sustainable development in the host country.  It is up to the developing countries, which host CDM projects, to determine their own criteria and assessment processes.