To give countries options in how they meet their targets for reductions in emissions, 'flexibility mechanisms' such as the Clean Development Mechanism and Joint Implementation have been set up so that any country may meet its targets in part by funding emissions-reducing projects in other countries where costs may be lower.

Of these, the CDM seems to have most problems. They are described in the following sources:

• "Box 4.5. Recent Emission-Reduction Policy Initiatives" on pp 24-27 in Chapter 4 of World Economic Outlook, Housing and the Business Cycle, International Monetary Fund, April 2008 (scroll down for download link).
• CDM Watch.

In summary, the main problems appear to be these:

• Additionality: Although, under CDM rules, funding should not be provided for projects that would have gone ahead anyway, it can be difficult to establish whether or not that is true.
  
• Leakage: If a project is funded in a country with no comprehensive policy for reducing emissions, then any reductions achieved by the given project may be nullified by increases in emissions elsewhere.
• Permanence: Projects to capture carbon by, for example, growing trees provide no guarantees that the carbon will be sequestered permanently.
  
• Trying to include such things as 'foregone deforestation' is fraught with difficulties.
• Perverse incentives. There are reports that, in some countries, factories have been set up to make CFCs so that CDM payments may be gained for projects to destroy them.
• Fraud: There are many opportunities for fraud.