About 14 percent of CDM projects worldwide are wind energy projects. Almost 40 percent are located in China, pictured above.

Emissions-reducing projects continued their steady rise across the developing world this year, with investments growing especially in China, according to a U.N. Environment Programme (UNEP) annual report.

U.N. Framework Convention on Climate Change administrators who oversee Clean Development Mechanism (CDM) projects acknowledge that, despite the increased number of investments, the process is generally flawed. A significant overhaul is expected in the years ahead.

CDM projects were created under the Kyoto Protocol to allow industrialized countries to meet their emissions-reduction targets through low-emission investments in the developing world. It was also designed to assist the global spread of clean energy.

As of late November, 4,237 CDM projects were validated, registered, or sought registration. The number of projects nearly doubled this year; 2,809 were recorded in 2007, the report said [PDF].

Even with the increased investments - due mostly to the expansion of the European Union Emission Trading Scheme - the CDM Executive Board acknowledges that significant system reforms are needed.

"Despite steady progress, indeed much success, the Executive Board and all of its support bodies must address with renewed urgency in 2009 the task of improving the CDM," said Lex de Jonge, vice chair of the CDM Executive Board, in a December report [PDF].

The CDM process is largely criticized for failing to ensure greenhouse gas reductions. Some projects provided polluters with offset credits despite the fact that many projects would have occurred regardless of the CDM investments, the U.S. Government Accountability Office noted in a December report. In addition, the CDM process does not prevent developing countries from supporting projects that contribute to climate change - most projects, in fact, are located in rapidly industrialized countries.

The CDM process is also burdened with bureaucratic delays - about 29 percent of projects that are registered or undergoing review are idling, the International Emissions Trading Association said in its 2008 State of the CDM report. And the CDM Executive Board is accusing some of the largest CDM auditors of improperly validating projects.

Still, UNEP Executive Director Achim Steiner said the CDM experience demonstrates "great success" of international collaboration on climate change. "The challenge now is to streamline it and overcome some of the hurdles," Steiner said in a press release. "By 2012 we estimate that over 8,000 CDM projects may be up and running or in the pipeline, generating financial flows from North to South of well over $30 billion."

Ongoing negotiations to replace the Kyoto Protocol will significantly affect the CDM future. Among the proposals that climate negotiators will discuss at next year's climate summit in Copenhagen is the possible tying of future CDM credits to a sector-wide reduction of emissions. For instance, China's entire electricity sector would have to reduce emissions in order for electricity-related CDM projects to sell their credits on the carbon market.

"The CDM of the Copenhagen agreement will be very different from the CDM of the current state, especially for major emerging economies," said Jake Schmidt, director of international climate policy programs at the Natural Resources Defense Council.

At this month's climate negotiations in Poznań, Poland, African delegates lobbied for new rules that encouraged a wider geographical range of CDM projects. More than three-quarters of current projects are located in Asia and the Pacific region, with China and India by far receiving the lion's share of investments.

The emerging economies of China, India, Brazil, and Mexico collectively receive about 76 percent of CDM projects. In Latin America, the percentage of cumulative projects jumped from 2.2 percent in 2007 to 19 percent this year. Projects in other regions of the world are on the rise, but the distribution has proportionally remained about the same, according to the UNEP report.

Negotiators are also discussing whether CDM projects should include avoided deforestation and building retrofits. So far, renewable energy projects account for 63 percent of CDM projects, with hydroelectric, biomass, and wind the most common, the UNEP report said.

The number of projected Certified Emission Reductions, offsets sold to companies or traded in carbon markets, rose to 2,900 this year. Each is equivalent to 1 ton of avoided carbon dioxide.

Ben Block is a reporter with the Worldwatch Institute. He can be reached at bblock@worldwatch.org.