Bagasse power generation projects provide a useful framework for evaluating several key aspects of theClean Development Mechanism of the Kyoto Protocol. On the positive side, our analysis, which draws inpart from a data set of 204 bagasse electricity generation projects at sugar mills, indicates that theseprojects provide Annex I country investors with a cost-effective means to achieve greenhouse gasemissions reductions. Our analysis also confirms that the marketplace for Clean DevelopmentMechanism-derived offsets is robust and competitive. Moreover, bagasse projects appear to provide apositive example in a ‘‘new wave’’ of clean energy investment that has replaced the earlier industrial gasprojects. At the same time, we also identify two aspects of the CDM that demand improvement. First,the additionality standard needs to be tightened and made more transparent and consistent. Financialadditionality should be required for all projects; however, any financial additionality test applied by theClean Development Mechanism’s Executive Board must be informed by the significant barriers faced bymany projects. Second, the administrative processes for registration and verification of offsets need tobe streamlined in order to prevent long registration time lags from chilling clean energy investment.