UNDERSTANDING CDM's AND JI'S
CDM
The Clean Development Mechanism (CDM) is a project-based mechanism under the Kyoto Protocol that allows industrialized countries to pay for projects that reduce emissions in poorer nations, and are then awarded certified emission reductions (CERs) that can be used to meet their own emission targets. The goal of the CDM is to assist developing countries in achieving a sustainable development and to assist developed countries in achieving their emission limitations and reductions under the Kyoto Protocol.
The CDM is cost-effective and offers a degree of flexibility to industrialized countries who are trying to meet their Kyoto targets. This relationship is mutually beneficial; industrialized countries and their companies are able to achieve emissions reductions at a cost below what such reductions would cost in their home country, and recipient countries receive investment in their native industry and a transfer of advanced technology that allows their factories and plants to operate more efficiently.
CERs can be used to meet requirements under the Kyoto Protocol and may be used by industry for compliance under the European Union's European Emissions Trading Scheme (ETS). The CDM has generated considerable investment in developing countries. CERs have become one of the global carbon markets most actively traded commodities. There is a liquid trading market for CERs transacted under a variety of terms, included guaranteed delivery, contingent delivery, indexed price, payment on delivery, and partial down payment.
JI
Joint Implementation (JI) is a project-based mechanism under the Kyoto Protocol that allows industrialized countries to meet part of their required cuts in greenhouse gas emissions by paying for projects that reduce emission in other industrialized countries.
The sponsor country receives emission reduction units (ERUs) for undertaking a specific project and then those ERUs can be used to meet the sponsor country's own Kyoto targets, while the recipient country is benefiting from advanced technology transfer and foreign investment.
To proceed with Joint Implementation projects, similarly with CDM, developed countries must meet requirements stated under the Kyoto Protocol by showing accurate inventories of greenhouse gas emissions and detailed registries of emissions "units" and "credits."
JI credits or ERUs may also be used for compliance with emissions reduction targets under the European Emissions Trading Scheme. Although developed later than the CDM, processes for certifying and registering JI projects are being developed.
