The purpose of the CDM is to promote clean development in developing countries, i.e., the "non-Annex I" countries. The CDM is one of the Protocol's "project-based" mechanisms; in that the CDM is designed to promote projects that reduce emissions. The CDM is based on the idea of emission reduction "production". These reductions are "produced" and then subtracted against a hypothetical "baseline" of emissions. The emissions baselines are the emissions that are predicted to occur in the absence of a particular CDM project. CDM projects are "credited" against this baseline, in the sense that developing countries gain credit for producing these emission cuts.
The economic basis for including developing countries in efforts to reduce emissions is that emission cuts are thought to be less expensive in developing countries than developed countries. For example, in developing countries, environmental regulation is generally weaker than it is in developed countries. Thus, it is widely thought that there is greater potential for developing countries to reduce their emissions than developed countries.
From the viewpoint of bringing about a global reduction in emissions, emissions from developing countries are projected to increase substantially over this century. Infrastructure decisions made in developing countries could therefore have a very large influence on future efforts to limit total global emissions. The CDM is designed to start off developing countries on a path towards less pollution, with industralized countries paying for these reductions.
There were two main concerns about the CDM. One was over the additional of emission reductions produced by the CDM. The other was whether it would allow rich, northern countries, and in particular, companies, to impose projects that were contrary to the development interests of host countries. To alleviate this concern, the CDM requires host countries to confirm that CDM projects contribute to their own sustainable development. International rules also prohibit credits for some kind of activities, notably from nuclear power and avoided deforestation.