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The clean development mechanism (CDM) could play an important role in the power generation sector of developing countries and emerging economies by providing additional revenue to support the diffusion of renewable energy sources (RES). This paper investigates the contribution of the CDM to deployment of renewable electricity projects in China and India, and highlights the main potentialities and limitations of this mechanism for their support. The outcome of our analysis shows many differences and similarities in the way and scale of CDM projects for renewable electricity generation have been implemented in the two countries. In both cases, the CDM has made a contribution to greening investments in the power generation sector, which is still largely dominated by subcritical coal-fuelled power plants. Nonetheless, some major problems still remain and they are mainly related to the distribution of projects across different technologies and to the environmental integrity of the mechanism. In view of the likely revision of the CDM in the post-Kyoto period, we find that the differentiation of the credit generation rate of different project categories could bring some level of improvement without significantly altering the current system functionality. [ABSTRACT FROM AUTHOR]