Clean Development Mechanism (CDM) and Joint Implementation (JI) projects can offer a range of business opportunities including:
- meeting emission reduction targets
- generating additional revenue in the form of tradable credits or raising investment capital
- improving funding opportunities
- providing services - eg lawyers, insurers, risk ratings, auditors and project developers
- brokerage and trading of allowances and carbon
- selling credits to businesses and consumers
The Environment Agency is responsible for the approval of CDM and JI projects made after 1 June 2011. CDM and JI projects must be established in accordance with the procedures and processes given by the United Nations Framework Convention on Climate Change (UNFCCC). If a methodology does not exist for a project type, a new methodology can be developed and submitted to the UNFCCC. Find a list of approved methodologies on the UNFCCC website.
To register a project a developer must:
- develop a project proposal and get agreement in principle for the project from the host country
- identify the existing emissions (known as the baseline), calculate the level of emissions reductions associated with the project, confirm how the calculation was carried out, and describe how the emissions reductions will be monitored
- have the project proposal approved by the host nation for CDM and JI projects
- have the project audited and then submit it for international approval to the CDM Executive Board (CDM projects) and to the Joint Implementation Supervisory Committee or the host country (JI projects)
- deliver the project and monitor the savings
- submit the monitoring for third party verification, based on which the carbon credits will be issued
Not all emissions reduction projects automatically qualify. A concept referred to as 'additionality' underpins all carbon offset projects. A project activity is deemed additional if emissions of greenhouse gases are reduced below those that would have occurred in the absence of the registered project activity. A carbon credit will eventually be retired to offset a tonne of emissions elsewhere, so if credits are issued to projects for emissions reductions that would have occurred without the project, then there would be no overall emissions reductions.
Annex I countries are able to host JI projects and Non Annex I countries can host CDM projects, subject to certain conditions being met. You can find a list of Annex I countries on the UNFCCC website. You can also find a list of Non Annex I countries on the UNFCCC website.
To host CDM projects, Non Annex I countries need to have appointed a Designated National Authority (DNA). You can find out which countries have DNAs on the UNFCCC website.
You can also find a list of parties currently involved in JI projects on the UNFCCC website. Please note some countries are ineligible for either mechanism.
If you are registering your project with a UK project participant you will need:
- a letter of approval from the Environment Agency
- a letter from the designated national authority or designated focal point in the country hosting your project.
Please note that the UK Government does not approve JI projects in the UK, but can issue letters of approval to UK companies wishing to participate in JI projects overseas.
You can read about obtaining a letter of approval for a CDM project on the Environment Agency website. You can read about obtaining a letter of approval for a JI project on the Environment Agency website. If you have any queries on letters of approval you can email:
The Department of Energy and Climate Change will continue to assess and issue letters of approval for applications made before 1 June 2011. If you have queries on applications before 1 June 2011 you can email:
All CDM project applications must be validated by a UN accredited validation agency, known as a Designated Operation Entity (DOE), before being submitted to the UNFCCC. You can find a list of accredited DOEs on the UNFCCC website. JI projects need to be determined by a UNFCCC approved Accredited Independent Entity (AIE). You can find a list of AIEs on the UNFCCC website. There are a range of companies offering consultancy services that can help you register your CDM or JI project with the UNFCCC. You could also opt to register your project yourself. There are significant costs associated with registering a project under the CDM or JI. However, for small scale projects there are simplified procedures which alleviate some of these costs.
There are a wide range of companies, from large well known organisations to specialist SMEs that have developed services around the global carbon market. You can find a directory of UK based companies working in the global carbon market on the BIS website.
There are two trade associations operating in the sector, the Carbon Market and Investors Association (CMIA) and the International Emissions Trading Association (IETA) . You can find further details of companies operating in the global carbon market on the CMIA website.
To receive credits from a CDM or JI project you will need to hold a registry account. Find registration and application information on the EU Registry for Emissions Trading website.
Funding and support
The Carbon Trust offers 0 percent interest loans to help organisations finance and invest in energy saving projects. Find out more about loans for energy saving projects on the Carbon Trust website. Find out more about loans for energy saving projects on the Carbon Trust website.
UK Trade and Investment (UKTI) offer a variety of services to UK companies wishing to export their global carbon market services overseas. UKTI also run a number of partnership programmes to help UK companies to find new partners and expand their businesses. Find out more about partnership programmes on the UKTI website.
For assistance with inward UK investment into your country contact UK Trade and Investment. You can find UKTI contacts on the UKTI website.