The mechanism stimulates sustainable development and emission reductions, while giving industrialized countries some flexibility in how they meet their emission reduction limitation targets.

The projects must qualify through a rigorous and public registration and issuance process designed to ensure real, measurable and verifiable emission reductions that are additional to what would have occurred without the project. The mechanism is overseen by the CDM Executive Board, answerable ultimately to the countries that have ratified the Kyoto Protocol.

In order to be considered for registration, a project must first be approved by the Designated National Authorities (DNA).

Operational since the beginning of 2006, the mechanism has already registered more than 1,000 projects and is anticipated to produce CERs amounting to more than 2.7 billion tonnes of CO2 equivalent in the first commitment period of the Kyoto Protocol, 2008–2012.

The mechanism is seen by many as a trailblazer. It is the first global, environmental investment and credit scheme of its kind, providing a standardized emissions offset instrument, CERs.