The Clean Development Mechanism (CDM), which is part of the Kyoto Protocol, tries to do exactly that. It encourages companies to invest in sustainable development projects and rewards them with emissions credits which they can sell to industrialized countries which have exceeded their emissions allowances.

DW-Radio talked to Janos Pasztor, an expert at the Secretariat of the UN Framework Convention on Climate Change about the mechanism.

DW-Radio: What exactly is the Clean Development Mechanism?

Janos Pasztor: It is one of the mechanisms under the Kyoto Protocol. It allows a developed country party to make an investment in a developing country in some energy or other related scheme which will reduce global emissions of CO2 and at the same time advance the sustainable development goals of that country. So it’s a "win-win" activity where both emissions are reduced -- and sustainable development is promoted. What is most important, however, is that the emissions reduced can then be used by the investing country to reach its own commitment toward the Kyoto Protocol.

So how does that work in practice? What would be one successful example?

In practice, the way it works is: an investor goes into a developing country -- let’s say China and finds a project that will, let’s say, produce renewable energy and which otherwise wouldn’t take place.

Investment is made, a private sector participant builds the energy facility, and then a monitoring plan is put in place to measure the amount of greenhouse gases that are not emitted. And then, [once the monitoring report is available] it becomes a certified emission reduction: CER. Those certified emission reductions are then made available and it’s like money. You can sell it, you can buy it, you can put it into the international market.

Isn’t there a danger that some of the wealthier industrialized countries say "fine, we have done our job there, we’ve invested in some wind and solar energy in China, so we don’t have to stop producing our own emissions?"

There is a danger but the governments have thought about that and the idea behind these so-called "flexibility mechanisms," as they are called, is that they are supposed to be additional, supplementary to national action. Now, that was never defined, what that means: supplementary. Is it more than half? More than thirty per cent? More than 80 per cent? That was not defined but it is still meant to be supplementary, with the emphasis being on national action.

What contribution has the CDM made towards reducing emissions?

Progress actually has been exponential. About a year-and-a-half ago we had about forty or fifty registered projects. We now have 300 registered projects. And that’s very large and we have about a thousand projects actually in the pipeline.

These projects together by the end of the first commitment period will reduce over a billion tones of CO2 equivalent. Now that’s a very large amount of emissions; that’s equivalent to emissions a number of industrialized countries together like the United Kingdom, Spain and New Zealand all together.

So the industrialized countries get the credits, they get allowances, the developing countries get new technology and can improve their quality of life. On the whole, which countries stand to benefit most from the CDM?

Well, this is a perfect example of a "win-win" activity where both benefit and that’s the whole idea behind the clean development mechanism. Developing countries need investment in new energy systems and while investment takes place anyway through foreign direct investment and other means, the CDM allows a little more to go in that direction and do it in a way that is climate-friendly.

So the globe benefits because there’s less emissions, the industrialized country benefits because they can use some of these credits to help them achieve their commitments under the Kyoto Protocol, and the developing country benefits because they get an energy system that is more favorable to the environment, to sustainable development as a whole.

What [is the stance of oil-producing Middle Eastern] countries to CDM?

One example in the region, Qatar, recently signed off on a CDM project that instead of flaring the gas in a refinery, it will use that to produce electricity locally. Now that’s clearly a more advantageous way to use this resource and it can be done in the CDM and it can be done in a way that it helps Qatar and it helps somebody else to meet its Kyoto goals. There may be other technologies through the CDM that could also be useful for the region, such as in particular carbon capture and storage which is a technology that would store carbon dioxide.

There are many technologies, but one of them is in oil being re-injected back into the oil well and that’s something that countries in this region think that they could do. So they think that it’s useful for them and therefore they’re organizing a big international conference to exchange ideas, exchange views and learn.

But there are a lot of people in industrialized countries and in developing countries who will say, "Looking at the money produced from oil revenue, these countries should be easily be able to invest in new technologies and other processes on their own without having assistance from CDM."

But this is not assistance. The CDM is not assistance, it’s investment. It’s private sector investment in those countries and the only difference is that they’re doing the investment in a climate-friendly manner and that extra difference is in the advantage of both the receiving and the donor countries.

So we’re not talking about aid, which is assistance, we’re talking about re-directing investment in a climate-friendly manner using the market to its fullest potential.

On the whole, though, there is surely little motivation for oil-producing nations to stop producing oil which would rob them of their income and their main source of energy. Is the odd little investment in a CDM project going to be enough?

Well, it may not be enough but nobody is going to be able to convince the countries of that region to stop oil production and oil use; that’s not the intention. The intention is to try to make the use of oil as efficient as possible so that per unit of output, you use less and less oil. So, for example, the recent project that I just mentioned in Qatar, instead of flaring the gas they will use that for electricity production.

Now that’s good for the world environment because something that would have just been flared away and would have increased the greenhouse gas potential will be now used for economic activity.

Now if you look back at what has happened in the region and oil use globally, even if countries are using oil more efficiently, there is more and more use. I think the countries of the region are seeing that there is no future without oil, oil is part of the future, but it can be used more efficiently and can be used in a more environmentally-friendly and climate-friendly manner.