Changes in climate become common concern of all mankind. Consequences resultingrnfrom global warming such as rise in the sea level, ji'equent occurrence of naturalrncalamity, agricultural breakdown, melting of the polar ice, worsening human heathrneffect, disruption of the water cycle, to mention some, urged the international communityrnto seek remedy. In response to these consequences the GA urged governments andrnintergovernmental and non-governmental organizations to collaborate in a concertedrneffort to prepare conventions.rnAfler long and tiresome negotiation the international community adopted UNFCCC inrn1992 and it's Kyoto Protocol in 1997 to stabilize GHG. The Kyoto Protocol requires thernindustrialized countries specified in Annex 1 to reduce their average emissions of sixrnGHG by 5.2%from 1990 levels between the years 2008 and 2012. The Protocol adoptedrnthe principles of differentiated commitments between the industrialized north and nonindustrializedrnsouth. To meet the different ends of the north and south flexible mechanismrnis adopted in the protocol. CMD AIR is one of these flexible mechanisms adopted in thernProtocol.rnCDM AIR aims to achieve climate change mitigation through the market basedrnapproach: Industrialized countries receive emission rights in exchange for financingrnemission abatement projects in countries without emission target. It also aims to assistrndeveloping countries in achieving sustainable development by promoting environmentallyrnfriendly investment from industrialized countries.rnThe procedure for the implementation of CDM AIR project is cumbersome. Apart Fomrnthe procedure, the implementation of CDM AIR project raises number of legal andrninstitutional issues. Ethiopia as part of the international community ratified the UNFCCCrnand its Kyoto Protocol and currently pilot CDM AIR project in the SNNPRS. Whilernimplementing CDM AIR project there must be institutional setup and legal framework tornrealize the project. The writer believes that this paper points out the legal andrninstitutional gaps for the implementation of CDM AIR project and contributes to benefitrnFom the CDM AIR regime.