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It is widely agreed that the Clean Development Mechanism (CDM) is a useful international instrument that encourages and reinforces the reduction of greenhouse gas emissions (GHGs), and also that it should be further promoted as a way to fill the gap in energy and GHG efficiency between industrialized and developing countries. A number of problematic issues have become apparent, however, during the past two and a half years of experience with the CDM. This paper identifies some of these and provides possible insights into their nature and possible resolution. While some technical aspects such as baseline setting are crucial and are being resolved gradually through accumulated experience, other political aspects such as the utilization of public funding need more discussion (rather than formal negotiations).