The Clean Development Mechanism (CDM) is part of the United Nations Framework Convention on Climate Change (UNFCCC). The CDM allows the public or private sector in developed nations the opportunity to purchase carbon credits from offset projects in developing nations. These credits, or “Certified Emission Reductions” (CERs) must meet strict requirements and be verified by authorized third parties.
In order to generate CERs, CDM projects must meet a detailed set of standards and go through an involved process:
- Preparation of a Project Design Document (PDD), including a baseline calculation and monitoring plan. If the methodology is a new one, it must be approved by the CDM Executive Board.
- Validation of PDD by an authorized, independent third party.
- Registration of the project with the CDM Executive Board
- Implementation and monitoring of the project
- Verification of emission reductions/avoidance by a different independent third party
- Certification of emission reductions/avoidance by a third party
Only after all of these steps have been completed will CERs be issued.
Because CDM standards are so stringent and CERs are subject to an involved review process, they are highly reliable credits. On the other hand, CERs typically have high transaction costs which generally limits registration to large projects.
For more information about the Kyoto CDM, click here . . .
Return to: Industry Standards
