The central feature of the Kyoto Protocol is its requirement that countries limit or reduce their greenhouse gas emissions. By setting such targets, emission reductions took on economic value. To help countries meet their emission targets, and to encourage the private sector and developing countries to contribute to emission reduction efforts, negotiators of the Protocol included three market-based mechanisms - Emissions Trading, Clean Development Mechanism and Joint Implementation.

The CDM established under Article 12 of the Kyoto Protocol allows emission reduction (or emission removal) projects in developing countries to earn certified emission reduction (CER) credits, each equivalent to one tonne of CO2.
These CERs can be traded and sold, and used by industrialized countries to a meet a part of their emission reduction targets under the Kyoto Protocol.

The mechanism stimulates sustainable development in developing countries, while giving industrialized countries some flexibility in how they meet their emission reduction limitation targets.

The projects must qualify through a rigorous and public registration and issuance process designed to ensure real, measurable and verifiable emission reductions that are additional to what would have occurred without the project.

The mechanism is the first global, environmental investment and credit scheme of its kind, providing a standardized emissions offset instrument, CERs.

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