This research scheme initially analysed the long-term potential for the use of project-based mechanisms (JI & CDM) in Germany and identified project categories for JI and CDM-projects that are particularly promising in ecological and economic respects. Based thereupon the potential costs savings from the use of Kyoto mechanisms were assessed through model simulations by the ZEW. Finally, restrictions on the increased use of JI and CDM in Germany were investigated and concrete proposals for instruments making wide use of flexible mechanisms were developed. The ZEW simulations show that the use of the project-based mechanisms by Germany drastically reduces the macroeconomic costs of an ambitious climate policy until the year 2100 as compared to domestic abatement measures.