Flexible Mechanisms - Project-based Mechanisms

Project-based Mechanisms

The Protocol defines two project-based mechanisms that allow Annex I countries to meet their GHG emission reduction commitments by acquiring GHG emission reductions "credits." The credits are acquired by an Annex I country financing projects that reduce emissions in non-Annex I countries or other Annex I countries, or by purchasing credits from Annex I countries with excess credits. The project-based mechanisms are the Clean Development Mechanism (CDM) and Joint Implementation (JI).

The project-based mechanisms allow Annex I countries with efficient, low GHG-emitting industries, and high prevailing environmental standards to purchase carbon credits on the world market instead of reducing greenhouse gas emissions domestically. Annex I countries typically will want to acquire carbon credits as cheaply as possible, while non-Annex I countries want to maximize the value of carbon credits generated from their domestic greenhouse gas reducing projects.