Clean development mechanism
Also called: CDM · Topic: Environment and Sustainable Development · NCERT: Beyond NCERT
Meaning
The clean development mechanism (CDM) was a market mechanism under the Kyoto Protocol (1997). Developed countries, or their firms, paid for emission-cutting projects in developing countries. In return, they earned certified emission reductions (CERs). These are credits that they could count towards their own Kyoto targets. The idea was to cut emissions where it was cheapest while sending money and technology to developing countries.
Example
A European company funds a wind farm in India that replaces coal power. The emissions avoided earn CERs, which the company uses to meet its Kyoto obligation. India was the second-largest host of CDM projects after China.
Don't confuse with
- Joint implementation (JI): another Kyoto mechanism, but its projects ran between two developed (Annex I) countries. The CDM linked developed and developing countries.
- Paris Article 6.4 mechanism (PACM): the successor crediting mechanism under the Paris Agreement. Its rules were finalised at COP29 (2024).
Related concepts
- Internalisation of externalities
- Carbon pricing
- Green tax
- Social cost of carbon
- Internal carbon price
- Fossil fuel subsidies
- Cap-and-trade
- Carbon market
- Compliance carbon market
- Voluntary carbon market