Abstract The Mediterranean basin countries on the one hand are considered a climate change vulnerability “hotspot”, while on the other they obtain a substantial potential for the implementation of clean development mechanism (CDM) projects and especially for North Africa region. Abatement of greenhouse gas emissions can mainly be achieved through utilizing renewable energy sources in the region, implementing energy efficiency measures and substituting oil with natural gas in energy generation. However, with few exceptions, the majority of these countries have a limited track record in the CDM pipeline. The aim of this paper is to investigate possibilities for CDM projects and indentify the main challenges for the promotion of CDM activities in the Mediterranean region. In this respect, an assessment of the current state of related institutional and policy setting, CDM potential and barriers related to the implementation of a CDM project in two representative case study countries of the Mediterranean basin, namely Egypt and Morocco was elaborated. The analysis indicated that the overall CDM potential in Egypt and Morocco are almost equal and both countries demonstrate the same tendencies, the key problem, however, remains on how to deal with the political instability and regulatory barriers the region face.