This study examines the causal impacts of the Clean Development Mechanism (CDM) on the environmental performance of Indian manufacturing firms, as measured by their energy use, carbon dioxide (CO2) emissions and respective intensities. The impacts of the CDM projects are estimated by combining statistical matching with the difference-in-differences approach. We found that the CDM projects significantly reduced firm CO2 intensity and energy intensity, but had no effect on total CO2 emissions. Our results also reveal different channels through which firm CO2 intensity was likely to be improved. We showed that firms hosting CDM projects increased the use of clean fuels and energy sources. These results suggest additionality of the CDM projects hosted by manufacturing firms in India had the firms' sales expanded in a similar fashion absent the CDM projects.