Last updated: 5 August 2026.
Quick answer. The Sustainable Development Mechanism (SDM) created by Article 6.4 of the Paris Agreement is designed to replace and improve the Clean Development Mechanism (CDM) of the Kyoto Protocol. Beyond emission reduction, the SDM embraces sustainable development and adaptation; it is open to all countries, instead of dividing them into developed and developing groups; it is expected to apply stricter additionality criteria and more robust baseline methodologies; it introduces rules against double counting, with corresponding adjustments when emission reductions are transferred; a new supervisory body with more balanced representation will oversee it; and it must deliver a net contribution to global mitigation, with sustainable development criteria aligned with the UN Sustainable Development Goals. The transition of existing CDM projects and methodologies remains under discussion.
The Sustainable Development Mechanism (SDM) under Article 6.4 of the Paris Agreement is designed to replace and improve upon the Clean Development Mechanism (CDM) of the Kyoto Protocol. This transition reflects the evolution of global climate policies and aims to address some of the criticisms and limitations of the CDM. Let’s examine how the SDM is expected to replace the CDM:
Scope and Objectives:
- CDM: Primarily focused on emission reduction and technology transfer to developing countries.
- SDM: In addition to mitigation, it has a broader focus that includes sustainable development and adaptation to climate change.
Country Participation:
- CDM: The CDM divided countries into developed (Annex I) and developing (non-Annex I) countries.
- SDM: All countries can participate in both the generation and use of credits, reflecting the principle of common but differentiated responsibilities under the Paris Agreement.
Additionality and Baselines:
- CDM: Included additionality criteria often criticized for being too lax.
- SDM: Expected to have stricter criteria and more robust baseline methodologies to ensure environmental integrity.
Accounting and Avoiding Double Counting:
- CDM: Lacked clear rules to avoid double counting.
- SDM: Includes stricter rules to avoid double counting, including corresponding adjustments when emission reductions are transferred.
Governance:
- CDM: Overseen by the CDM Executive Board under the UNFCCC.
- SDM: A new supervisory body will be established, expected to have more balanced representation and transparent processes.
Contribution to Global Mitigation:
- CDM: Did not have an explicit mechanism to contribute to net global emission reductions.
- SDM: Includes provisions to ensure a net contribution to global emission mitigation, possibly through the cancellation of a portion of the generated credits.
Sustainable Development:
- CDM: The impact on sustainable development was often secondary and difficult to quantify.
- SDM: Expected to have more robust and measurable criteria for sustainable development, aligned with the UN Sustainable Development Goals.
Transition of Projects and Methodologies:
- There is ongoing debate on how and to what extent CDM projects and methodologies could transition to the new mechanism.
- Criteria are likely to be established to determine which CDM projects can continue generating credits under the new system.
Scale and Types of Activities:
- CDM: Primarily individual projects.
- SDM: Expected to cover a broader range of activities, including programs and possibly sectoral approaches.
Use of Credits:
- CDM: Credits were primarily used for compliance with Kyoto Protocol targets.
- SDM: Credits can be used for compliance with Nationally Determined Contributions (NDCs) under the Paris Agreement, as well as potentially in voluntary markets and other schemes (such as CORSIA for international aviation).
Adaptation and Loss and Damage:
- CDM: Did not directly address adaptation.
- SDM: A portion of the revenues is expected to be allocated to an adaptation fund for vulnerable countries.
Digitalization and Transparency:
- CDM: Often slow and bureaucratic processes.
- SDM: Expected to leverage digital technologies to improve efficiency, transparency, and traceability of credits.
The transition from CDM to SDM represents a significant shift in the global approach to market mechanisms for climate change mitigation. It seeks to learn from the experiences of the CDM, address its shortcomings, and align with the broader objectives of the Paris Agreement. However, many specific details about the implementation of the SDM are still under negotiation and are expected to be developed in the upcoming Conferences of the Parties (COP) of the UNFCCC.
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If you liked this article, you may also find it interesting to read the following one:What are the “flexible mechanisms” introduced by the Kyoto Protocol?
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Frequently asked questions
It is the market mechanism established under Article 6.4 of the Paris Agreement, designed to replace and improve the Clean Development Mechanism of the Kyoto Protocol. In addition to mitigation, it has a broader focus that includes sustainable development and adaptation to climate change, reflecting the evolution of global climate policy.
The CDM divided countries into developed (Annex I) and developing (non-Annex I) countries, with projects hosted in the latter. Under the SDM, all countries can participate in both the generation and the use of credits, reflecting the principle of common but differentiated responsibilities as framed by the Paris Agreement.
The CDM lacked clear rules to avoid double counting. The SDM includes stricter rules, notably corresponding adjustments when emission reductions are transferred between countries, so that the same reduction cannot be claimed twice towards different national targets.
Whereas the CDM was overseen by its Executive Board under the UNFCCC, the SDM will be supervised by a new body expected to have more balanced representation and transparent processes. It also includes provisions to ensure a net contribution to global emission mitigation, possibly through the cancellation of a portion of the credits generated.
There is ongoing debate on how, and to what extent, CDM projects and methodologies could transition to the SDM. Criteria are expected to be established to determine which CDM projects can continue generating credits under the new system, with stricter additionality and baseline requirements to safeguard environmental integrity.
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