The Clean Development Mechanism(CDM) is an arrangement under the Kyoto Protocol allowing industrialized countries with a greenhouse gas reduction commitment to invest in emission reducing projects in developing countries as an alternative to what is generally considered more costly emission reductions in their own countries. Under CDM, a developed country can take up a greenhouse gas reduction project activity in a developing country where the cost of GHG reduction project activities is usually much lower. The developed country would be given credits (Carbon Credits) for meeting its emission reduction targets, while the developing country would receive the capital and clean technology to implement the project.

Carbon credits a Clean Development Mechanism (CDM) Authority for the purpose of protecting and improving the quality of environment The CDM Authority has the powers:

1. to invite officials and experts from Government, financial institutions, consultancy organizations, non-governmental organizations, civil society, legal profession, industry and commerce, as it may deem necessary for technical and professional inputs and may co-opt other members depending upon need.
2. to interact with concerned authorities, institutions, individual stakeholders for matters relating to CDM.
3. to take up any environmental issues pertaining to CDM or Sustainable Development projects as may be referred to it by the Central Government, and
4. to recommend guidelines to the Central Government for consideration of projects and principles to be followed for according host country approval.