The Clean Development Mechanism (CDM) arose from the Brazilian proposal to create a Clean Development Fund, funded by those developed countries that had not complied with their quantified GHG emission reduction or limitation targets, which would be used to promote projects in developing countries. However, certain developed nations refused to accept the concept of penalization and the initial idea was transformed into the Clean Development Mechanism, through which those countries with emission reduction commitments (i.e. the Annex I countries) could acquire Certified Emission Reductions (CERs) generated by projects in the non- Annex I (developing) countries as a means of complying with part of their emission reduction targets under the Protocol. The idea is that the implemented project will generate environmental benefits (reduction of GHG emissions and/or net removal of CO2) in the form of transferrable financial assets (CERs).
The CDM therefore represents a substantial voluntary contribution on the part of the Annex I countries towards effectively changing the global warming tendency in accordance with the Convention, the Kyoto Protocol and the principle of common but differentiated responsibilities. By means of the CDM, the developing countries will continue to develop in a sustainable manner.
The CDM is based on the development of projects and part of its success is due to the enterprising nature of the business community. CDM project activities in the developing countries must be directly related to GHGs and produce real, measurable and long-term benefits. Such projects must therefore result in a reduction in GHG emissions or an increase in the net removal of CO2 and can involve the replacement of fossil fuels by renewable ones, the rationalization of energy use, afforestation and reforestation activities and more efficient urban services, among others. Projects must involve one or more of the gases listed in Annex A of the Protocol related to various sectors/sources of activities.