The Clean Development Mechanism
The CDM enables industrialised companies to gain additional carbon credits not through trading but through giving to projects in developing countries with no emissions targets, that bring about a reduction in carbon emissions. Such projects could include forestry plantations or renewable energy development. The mechanism was established in 2005 under the supervision of the United Nations Framework Convention on climate change. Because the cost of such investment is generally much cheaper, in terms of the emissions saved, in developing countries than in industrialised countries, there are considerable benefits both to the companies and to the recipients. However, as with carbon trading, a basically good idea has become subject to considerable financial manipulation. Aid agencies frequently observe that the cost of such investment is much higher than if they had provided the same services.
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Useful links
Wikipedia Definition
UNFCCC A positive explanation
Adaptation Fund A special fund to help countries adapt to the impact of climate change, funded from 2% of the proceeds of the CDM