This paper summarises a project undertaken by the International Institute for Sustainable Development, Climate Change and Development Consultants and the Center for Clean Air Policy, examining possible scenarios for using the Clean Development Mechanism (CDM) as a tool to promote sustainable development in Chile’s transportation sector.Through three different case studies, examining bicycle infrastructure, bus technology and location efficiency, the project examined baseline development and questions of additionality, monitoring and data requirements for technological as well as demand-side emission-based reductions.These case studies and the identification of several cross-cutting issues lead to several conclusions, including:there is a need for reform of the CDM and how it is appliedefforts should be made to build upon the infrastructure already in place; introduction of entirely new institutions would lead to high levels of uncertainty and may undermine the currently fragile carbon marketparties should examine taking a sectoral approach to emission reductions, which would help overcome the competitiveness concerns of industry related to the current structure of the CDMincorporating the impacts of demand-side measures could potentially be addressed by viewing de facto new policies as projects under the CDMthere is a need for further guidance on additionality requirements for transportation projects that would facilitate additional project development.Ultimately, the authors conclude that there needs to be a reorientation in transportation, reducing demands on the environment and improving transport sustainability.