The Kyoto Protocol's clean development mechanism (CDM) was established in 1997 with the dual purposes of assisting non-Annex I Parties in achieving sustainable development and assisting Annex I Parties in achieving compliance with their quantified greenhouse gas (GHG) emission commitments. This paper looks at the development of the CDM portfolio as well as achievements of the CDM to date in the context of wider private and public flows of investment into developing countries. These achievements include the development of 325 (by May 2005) proposed CDM projects which are together expected to generate more than 79 Mt CO2-eq credits/year during 2008–2012, increasing awareness of climate change mitigation options among possible investors and others that may facilitate transactions (i.e. governments), and the strengthening of climate-relevant institutions within countries. The paper also draws lessons from this experience to date, and outlines what changes may be needed to transform the CDM concept to a broader scale after the end of the first commitment period in 2012.