NASA Langley Research Center is working on a continuous wave (CW) laser based remote sensing scheme for the detection of CO2and O2 from space based platforms suitable for ACTIVE SENSING OF CO2 EMISSIONS OVER NIGHTS, DAYS, AND SEASONS (ASCENDS) mission. ASCENDS is a future space-based mission to determine the global distribution of sources and sinks of atmospheric carbon dioxide (CO2). A unique, multi-frequency, intensity modulated CW (IMCW) laser absorption spectrometer (LAS) operating at 1.57 micron for CO2 sensing has been developed. Effective aerosol and cloud discrimination techniques are being investigated in order to determine concentration values with accuracies less than 0.3%. In this paper, we discuss the demonstration of a PN code based technique for cloud and aerosol discrimination applications. The possibility of using maximum length (ML)-sequences for range and absorption measurements is investigated. A simple model for accomplishing this objective is formulated, Proof-of-concept experiments carried out using SONAR based LIDAR simulator that was built using simple audio hardware provided promising results for extension into optical wavelengths.