The Government of India has taken several initiatives for promotion of solar energy systems in the country during the last two decades. A variety of policy measures have been adopted which include provision of financial and fiscal incentives to the potential users of solar energy systems however, only 0.4 million solar home systems (SHSs) have been installed so far that is far below their respective potential. One of the major barriers is the high costs of investments in these systems. The clean development mechanism (CDM) of the Kyoto Protocol provides industrialized (Annex-I) countries with an incentive to invest in emission reduction projects in developing (non-Annex-I) countries to achieve a reduction in carbon dioxide (CO2) emissions at lowest cost that also promotes sustainable development in the host country. SHSs could be of interest under the CDM because they directly displace greenhouse gas (GHG) emissions while contributing to sustainable rural development, if developed correctly. In this study an attempt has been made to estimate the CO2 mitigation potential of SHSs under CDM in India. (C) 2009 Elsevier Ltd. All rights reserved.