The clean development mechanism (CDM) defines a new commodity, the certified emission reductions (CERs). This new commodity turns reductions of greenhouse gas (GHG) emissions into a cash flow for projects. In Malaysia, the palm oil industry generates readily available biomass residues in the form of empty fruit bunches (EFB), shells, mesocarp fibre and palm oil mill effluent (POME). Currently, the shells and mesocarp fibre are utilized to meet the steam and electricity requirements at the palm oil mills. The utilization of renewable energy resources not only increases the security of fuel supply but also contributes to local job creation and export opportunities for the country. With the launch of the small renewable energy power (SREP) programme by the government in May 2001, excess electricity generated at the mills can now be sold to the electricity grid. This encourages palm oil mills to improve the efficiency of steam and electricity generation.