The CDM has two basic objectives. The first objective is to assist developing countries achieve sustainable development and the second is to assist Annex 1 parties achieve compliance in a more cost-effective manner.
In summary, the CDM established under Article 12 of the Kyoto Protocol allows carbon offset projects in non-Annex 1 parties (essentially developing countries) to create certified emission reductions ("CERs") which can ultimately be used towards the national compliance obligation of Annex 1 parties under the Kyoto Protocol.
To qualify as a CDM project activity and receive CERs, a project must satisfy the criteria set out under Article 12, the Marrakesh Accords and other decisions of the Conference of Parties / Meeting of Parties and the CDM executive board specifically:
Unilateral CDM Projects
Certain non-Annex 1 parties have expressed an interest in undertaking CDM projects without the assistance of Annex 1 party participants and selling the CERs to entities other than the project participants. This concept has become known as a "unilateral CDM project".
The parties at the COP 7 agreed that unilateral CDM projects would be possible, although this agreement was not explicitly reflected in the resulting Marrakesh Accords. The CDM executive board's template project design document clearly allows for a situation where there is only one project participant and one party to a CDM project (i.e. the host country).
A unilateral CDM project would enable a non-Annex 1 party to undertake a project with all participants being nationals of the host country and no Annex 1 party's direct involvement.
The CERs created for this project could then later be sold to purchasers on the carbon market.