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Clean Development Mechanism PDF Print E-mail

Burning fossil fuels has led to the good life, but the build-up of these greenhouse gases (GHG) is cause for concern due to smog, acid rain and global warming. Thus, the Kyoto Protocol set forth the Clean Development Mechanism (CDM) as a flexible financing tool to support climate change initiatives that reduce CO2 and other gas emissions. To restore climatic stability, the CDM aims to help countries promote sustainable development by shifting to renewable energy resources.

The CDM facilitates co-operative projects between developed and developing countries for the reduction of GHG emissions, with the opportunity for additional financial and technological investment. These GHG reductions are quantified in standard units, known as Certified Emission Reductions (CER). The CDM involves the trading of emission reductions via CERs that result from a specific project. Other countries then use these CERs to meet their own reduction targets. In return, money is transferred to the project that actually reduces the greenhouse gases.

The following types of projects have potential for CDM in Malaysia. Two possible revenue streams exist for CDM projects: via traditional cashflows (e.g. electricity sales) and via environmental value of the investment (e.g. CERs). But not all projects qualify for CDM assistance. To be eligible, projects need to demonstrate that the proposed activity is an additional benefit resulting from a normal business venture:

  • Renewable energy projects, including PV, hydro and biomass;
  • Industrial energy efficiency;
  • Supply and demand side energy efficiency in domestic and commercial sector;
  • Landfill management (flaring or landfill gas to energy);
  • Combined heat and power projects;
  • Fuel switch to less carbon intensive fuels (e.g. from coal to gas or biomass);
  • Biogas to energy (from POME or other sources);
  • Reduced flaring and venting in the oil and gas sector;
  • Land-use, land-use change and forestry projects (afforestation, reforestation, forest management, cropland management, grazing land management and re-vegetation)


Malaysia is one of several developing countries promoting the use of renewable energy. Developers in Malaysia are already starting to utilise the CDM to initiate energy projects for biogas wastewater, biomass, compost, landfill gas, and mini-hydro. These eleven energy projects will produce a total of 73 MW of new renewable electric power. The waste sector offers tremendous potential for CDM, such as recovering emissions from methane sources. Palm oil mills using gas turbines become attractive with CDM financing, as well as small-scale power production projects using gas engines.

The real success of CDM projects depends upon the contribution they make towards national goals for sustainability. The Government takes the lead because only projects that receive national host country approval can be registered as CDM projects and generate CERs. 

Burning fossil fuels has led to the good life, but the build-up of these greenhouse gases (GHG) is cause for concern due to smog, acid rain and global warming. Thus, the Kyoto Protocol set forth the Clean Development Mechanism (CDM) as a flexible financing tool to support climate change initiatives that reduce CO2 and other gas emissions. To restore climatic stability, the CDM aims to help countries promote sustainable development by shifting to renewable energy resources.

The CDM facilitates co-operative projects between developed and developing countries for the reduction of GHG emissions, with the opportunity for additional financial and technological investment. These GHG reductions are quantified in standard units, known as Certified Emission Reductions (CER). The CDM involves the trading of emission reductions via CERs that result from a specific project. Other countries then use these CERs to meet their own reduction targets. In return, money is transferred to the project that actually reduces the greenhouse gases.

The following types of projects have potential for CDM in Malaysia. Two possible revenue streams exist for CDM projects: via traditional cashflows (e.g. electricity sales) and via environmental value of the investment (e.g. CERs). But not all projects qualify for CDM assistance. To be eligible, projects need to demonstrate that the proposed activity is an additional benefit resulting from a normal business venture:

  • Renewable energy projects, including PV, hydro and biomass;
  • Industrial energy efficiency;
  • Supply and demand side energy efficiency in domestic and commercial sector;
  • Landfill management (flaring or landfill gas to energy);
  • Combined heat and power projects;
  • Fuel switch to less carbon intensive fuels (e.g. from coal to gas or biomass);
  • Biogas to energy (from POME or other sources);
  • Reduced flaring and venting in the oil and gas sector;
  • Land-use, land-use change and forestry projects (afforestation, reforestation, forest management, cropland management, grazing land management and re-vegetation)


Malaysia is one of several developing countries promoting the use of renewable energy. Developers in Malaysia are already starting to utilise the CDM to initiate energy projects for biogas wastewater, biomass, compost, landfill gas, and mini-hydro. These eleven energy projects will produce a total of 73 MW of new renewable electric power. The waste sector offers tremendous potential for CDM, such as recovering emissions from methane sources. Palm oil mills using gas turbines become attractive with CDM financing, as well as small-scale power production projects using gas engines.

The real success of CDM projects depends upon the contribution they make towards national goals for sustainability. The Government takes the lead because only projects that receive national host country approval can be registered as CDM projects and generate CERs.