Abstract In view of the increasing interest in the development and dissemination of technologies for harnessing new and renewable sources of energy in India, there have also been some efforts towards their use in the domestic lighting sector. However, the cumulative number of Solar Photovoltaic (SPV) lighting systems such as SPV lanterns and solar home lighting systems in India is far below their theo- retical potential despite government subsidy programmes. One of the major barriers is the high capital investment in these systems. The Clean Development Mechanism (CDM) provides industrialized countries with an incentive to invest in emission reduction projects in developing countries to achieve a reduction in CO 2 emissions at lowest cost that also promotes sustainable development in the host country. SPV lanterns and solar home lighting systems could be of interest under the CDM be- cause they directly displace greenhouse gas emissions while contributing to sus- tainable rural development. However, only two SPV projects have been submitted under the CDM so far. This study assesses the maximum theoretical as well as the realistically achievable CDM potential of SPV lanterns and solar home lighting systems in India. The SPV lantern project is financially viable at a certified emissions reductions (CER) price of 34 € whereas the solar home lighting project is financially viable at a CER price of 46 €. While the maximum mitigation volume is about 35 million tonne CO 2 on an annual basis, an estimate of achievable CER levels is done using the past diffusion trends of SPV systems. We find that annual CER volumes could reach 0.8 to 2.4 million by 2012 and 5.6 to 13.6 million by 2020. This would require that the government sets the subsidy level for SPV lighting systems at a level that allows them to become viable with the CER revenue. From a macro- P. Purohit (&) Research Programme on International Climate Policy, Hamburg Institute of International Economics (HWWI), Neuer Jungfernstieg 21, 20347 Hamburg, Germany e-mail: pallav1976@yahoo.co.in A. Michaelowa Political Economy and Development, Institute of Political Science, Uniersity of Zurich, Mu ¨ hlegasse 21, 8001 Zurich, Switzerland e-mail: axel.michaelowa@pw.unizh.ch 123 Mitig Adapt Strat Glob Change (2008) 13:23–46 DOI 10.1007/s11027-006-9078-x ORIGINAL PAPER CDM potential of SPV lighting systems in India Pallav Purohit Æ Axel Michaelowa Received: 18 May 2006 / Accepted: 5 December 2006 / Published online: 4 January 2007 Ó Springer Science+Business Media B.V. 2006