The CDM is a project-based instrument that allows public or private entities to invest in greenhouse gas (GHG) mitigating activities in developing countries and earn abatement credits for use against targets they may have or for sale on the open market. The developing country must receive sustainable development benefits from the project in addition to the GHG emissions reductions.

Projects may be developed with a developed country partner, where the partner will obtain the carbon credits and the host country will receive the sustainable development benefits. Alternatively, a company based in a developing country can develop its CDM projects without partners and retain all the credits generated by the project. To qualify for CDM there are four basic requirements: the project must fit into an approved category or type; be additional to business as usual; result in real measurable emissions reductions as verified by a credited third party; and it must be in line with sustainable development objectives, as defined by the host government.

The current approved list of project categories includes:

• renewable energies
• energy efficiency at supply side and/or demand side
• fuel switch
• combined heat and power (CHP)
• avoidance/reduction of methane emissions, e.g. from landfill sites

Approved project types include:

• modernisation of existing structures (retrofit)
• expansion of existing plant (brownfield)
• new construction (greenfield)

All greenhouse gases governed by the Kyoto Protocol (CO₂, CH₄, N₂0, HFC, PFC and SF₆) are equated to CO₂ according to their relative impact, known as the global warming potential. This is simplified to tons of CO₂ equivalent (tCO₂e). The carbon credits earned from CDM projects are known as certified emissions reductions (CERs), representing tons of CO₂ equivalent, and these are traded on the carbon market. Carbon credits are calculated against a baseline of what emissions would have been without the project. The baseline is calculated according to methodologies specified in the international rules for CDM. Using these tools, Eskom has calculated the grid emission factor for use in our CDM projects. We have created a CDM page on the Eskom website where the information required to do this calculation is provided for other project developers to use. This information is updated annually.