All Clean Development Mechanism projects go through a project cycle. Some steps in this cycle are the same as for any other investment project – such as raising finance and implementing the project. What is different for CDM are the special requirements of qualifying and overseeing the project as a CDM project. This chapter provides an overview of the steps of the CDM project cycle.

Project identification and design
The project owner identifies an opportunity for a CDM project and develops a project design document which includes a baseline estimate and an analysis of the net carbon emissions reductions.

Host country approval
International acceptance of a CDM project first requires approval at the national level, consistent with the country’s domestic laws and policy priorities.

Third party validation of project design and baseline
To ensure that later verification of performance will provide certified credits, the project design document, and especially the baseline, have to be validated by an independent third party before implementation.

Registration
Once a project is validated and approved by the host country, it is registered by the CDM Executive Board.

Financial structuring
Finances are then secured. The investors provide capital investment in the form of debt or equity. These investors may or may not be the carbon buyers who will pay for certified credits on delivery.

Implementation and operation
The project is built, commissioned, and begins operation.

Monitoring
Project performance, including baseline conditions, is measured by the project developer in the commissioning process and during on-going project operation.

Third party verification of project performance
An independent third party verifies project performance against the validated design and baseline, in order to approve
certification.

Certification and issuance
Based on the host-country approval, the validated project design and baseline, and the verified project performance, CERs are certified and issued by the CDM Executive Board.