The stated goal of the Kyoto Protocol is to reduce global greenhouse gas emissions. One of the creative ways the Protocol sought to achieve this goal was the creation of the Clean Development Mechanism (CDM). Instead of forcing industrialized countries to make expensive greenhouse gas emissions reductions, the CDM provides flexibility by allowing the industrialized countries to purchase carbon credits from carbon dioxide-reduction projects in developing countries. For countries that have agreed to limit their greenhouse gas emissions, it sounds like the CDM would be a lower-cost way to reduce emissions, but there is evidence that countries, such as China, have gamed the system. Also, the CDM itself does not necessarily lead to efficient outcomes if the goal is greenhouse gas emissions reductions. Ultimately, energy prices increase for consumers in order to pay for these programs.
