Home > Background > CDM / JI


The Clean Development Mechanism (CDM) is a project-based transaction system through which industrialized countries can accrue carbon credits. Unlike JI, however, CDM credits are acquired by financing carbon-reduction projects in developing countries, making this mechanism the critical link between developed and developing countries under Kyoto.

Carbon offset credits originating from registered and approved CDM projects are called Certified Emission Reductions (CERs). CERs and ERUs can also be sold in the voluntary markets and CDM methodologies have influenced several offset project standards in the voluntary carbon markets.

The Clean Development Mechanism (CDM) was defined in Article 12 of the Protocol of Kyoto. Such projects can earn saleable certified emission reduction (CER) credits, each equivalent to one tonne of CO2, which can be counted towards meeting Kyoto targets.

The mechanism is seen by many as a trailblazer. It is the first global, environmental investment and credit scheme of its kind, providing a standardized emissions offset instrument, CERs.

A CDM project activity might involve, for example, a rural electrification project using solar panels or the installation of more energy-efficient boilers.

The mechanism stimulates sustainable development and emission reductions, while giving industrialized countries some flexibility in how they meet their emission reduction or limitation targets.

Currently there are more than 5.600 CDM projects in the pipeline that are expected to produce more than 2.700.000.000 CERs until the end of 2012. They are registered 3.189 projects in the fields of renewable energy (66,5%), waste handling and disposal (14,7%), and manufacturing industries (4,8%). Most of the projects are located in China (44,9%) and India (21,1%). The biggest investor from the developed parties are the UK (29,6%), Switzerland (19,5%), Japan (11,3%) and Netherlands (10,5%).

Joint Implementation (JI) allows emitters in developed countries (referred to as Annex-I countries under the Kyoto Protocol) to purchase carbon credits via “project-based” transactions (meaning from greenhouse gas-reduction projects) implemented in either another developed country or in a country with an economy in transition. Credits from these JI projects are referred to as Emission Reduction Units (ERUs).

A JI project must provide a reduction in emissions by sources, or an enhancement of removals by sinks, that is additional to what would otherwise have occurred.  Projects must have approval of the host Party and participants have to be authorized to participate by a Party involved in the project.

Projects starting as from the year 2000 may be eligible as JI projects if they meet the relevant requirements, but ERUs may only be issued for a crediting period starting after the beginning of 2008.

Another point related to JI are the domestic offset projects. Thus far, activities within and outside the ETS have taken place separately, although the common aim is to reduce GHG emissions. One possibility to combine the two is through so-called Non-ETS Offset projects, which would reduce emissions of CO2-eq. in the non-ETS sectors and trade these as CO2 credits on the ETS market. This would enable installations covered by the ETS to purchase CO2 credits from a domestic offsets project and add these to the number of CO2 emission allowances that they must surrender to the European Commission by the end of each year.  This could be done via the Kyoto Protocol in the form of JI or independent from Kyoto via Article 24a of the EU Climate and Energy Package Decision.

(Data taken from UNFCCC, JIN Network)