The Clean Development Mechanism (CDM) is a mechanism de ned in the Ky- oto protocol that incentivizes parties to the protocol to fund... Show moreThe Clean Development Mechanism (CDM) is a mechanism de ned in the Ky- oto protocol that incentivizes parties to the protocol to fund sustainable development projects in countries that are not party to the protocol. In the rst chapter of this paper, I introduce the CDM and how the nancing mechanism works. In the second chapter, I analyze a target contract nancing structure for di erent CDM projects in order to see under what conditions the nancing structure is e cient and to explore the contract's allocation of pro t among the rms. In the two broad categories of CDM projects I consider, I nd the optimal investment decision for the investor and for the overall system. I also analyze how the residual value of technology would a ect the nancing, target contract's e ciency, and allocation of pro t. In the third chapter, I conduct empirical analysis on the actual CDM outputs, Certi ed Emission Reduction units (CERs), for a sample of wind CDM projects in China. I nd that CDM projects greatly under perform relative to the promises they make. Based on this under-performing records, in the fourth chapter, I analyze the economic bene ts investors could gain if they were able to directly fund a portfolio of CDM projects and obtain returns from the anticipated CER issuances and underlying energy generated from the portfolio of CDM projects. I consider a variety of funding constraints that the CDM fund/portfolio manager (CDM-PM) may face and determine their economic performance against actual CDM project data for wind CDM projects in China. PH.D in Management Science, July 2013 Show less