Clean Development Mechanism (CDM)

The largest of the UN's official carbon offsetting schemes.

Launched as part of the Kyoto Protocol, the Clean Development Mechanism (CDM) enables companies and governments in industrialised countries to fund activities aimed at reducing emissions in developing countries as an alternative to undertaking similar but more expensive action at home.

Under the carbon offsetting scheme, independently approved clean technology projects in poorer nations, such as renewable energy developments or energy efficiency initiatives, are issued with carbon credits called certified emission reductions (CERs) that they can then sell to governments and businesses from industrialised economies.

The scheme is supervised by the CDM Executive Board under the guidance of the Conference of Parties of the United Nations Framework Convention on Climate Change.

The stated aim of the CDM is to enable net global greenhouse gas emissions to be cut at the lowest possible global cost, while also providing a means of financing low carbon projects in the developing world.

However, the scheme has proved highly controversial and has been criticised for consistently approving projects that fail to deliver genuine and additional cuts in carbon emissions and in some cases even financing relatively carbon intensive projects, such as clean coal developments.