The Clean Development Mechanism (CDM)
The Kyoto Protocol sets binding obligations on industrialized countries to reduce their emission of greenhouse gases (Methane and CO2) with the aim stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. The Kyoto Protocol stimulated sustainable development and emission reductions leading to the emergence of a new global market trading in greenhouse gases.
Carbon dioxide is the traded product. Under the Kyoto Protocol, the industrialized countries (i.e. European Union) have committed themselves to limit or reduce their emissions of greenhouse gases.
By their signatures, the industrialized countries recognize the contribution of greenhouse gases to global warming.
Achieving emission reduction aims involves huge financial investments, especially in industrialized countries in which manpower costs are high and with a strong currency. In order for such investments to become feasible, economic mechanisms, such as CDM, have been established. This mechanism allows industrialized countries to invest in projects executed in developing countries (such as Israel) which lead to voluntary reduction in greenhouse gas emission. Israel has been classified as a developing country, thus paving the way for foreign investments in greenhouse gas emission reduction projects.
As part of the CDM mechanism, a range of projects are executed in other industries, including magnesium, cement, and energy projects (fuel replacement, energy efficiency and renewable energy production).
Energy projects registered in the CDM mechanism are required to demonstrate that the expected benefit of participating in the carbon dioxide market have been considered in the preliminary planning stages. Upon activation, the energy project registers in its favor Certified Emission Reduction (CER) rights which allow the trading of these rights between industries and between countries, thus allowing global greenhouse emission reduction.