Carbon Markets & Offsetting
Clean Development Mechanism (CDM)
The Kyoto Protocol's project-based flexibility mechanism that generated Certified Emission Reductions from mitigation projects in developing countries.
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A mechanism established under Article 12 of the Kyoto Protocol allowing emission-reduction projects in developing countries to earn certified emission reduction (CER) credits — each equivalent to one tonne of CO₂e — which industrialised countries could use toward their Kyoto targets. Projects were validated against approved methodologies, verified by accredited auditors and certified by the CDM Executive Board.
References
Article 12 basis; CER = 1 tCO₂e; >1,650 registered projects; >2.9bn tCO₂e anticipated; Executive Board oversight.
Baseline and validation/certification chain; 2% Adaptation Fund levy; CER tradability.
Overview
What it means
The CDM was the first global carbon-crediting mechanism at scale: over 1,650 registered projects and more than 2. 9 billion tonnes of anticipated reductions for the 2008–2012 commitment period, with a 2% levy on CER proceeds funding the Adaptation Fund.
It built the entire infrastructure modern offsetting inherited — baseline methodologies, additionality testing, validation/verification bodies, registries — and also its cautionary record: research found significant shares of issued CERs with questionable additionality (notably industrial-gas projects), and EU ETS demand collapse after 2012 crashed CER prices. Under the Paris Agreement, the Article 6.
4 mechanism succeeds the CDM, with rules for transitioning eligible activities and credits agreed from COP26 onward.
How it is used
Legacy CERs trade at deep discounts and feed some compliance/voluntary windows (e. g. early CORSIA phases); CDM methodologies and institutions inform Article 6. 4 design; integrity assessments (ICVCM) evaluate legacy credits.
Why it matters
The CDM is the carbon market's founding experiment — its successes mobilised billions for mitigation, and its integrity failures wrote the rulebook every successor now claims to apply.
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