Since the Kyoto protocol agreement, Clean Development Mechanism (CDM) has garnered large emphasis in terms of certified emission reductions (CER) not only amidst the global carbon market but also in India. This paper attempts to assess the impact of CDM towards sustainable development particularly in rural domestic lighting sector. A detailed survey has undertaken in the state of Kerala, in southern part of India to study the rural domestic energy consumption pattern. The data collected was analyzed that throws insight into the interrelationships of the various parameters that influence domestic lighting energy consumption. The analysis also provides a plat form for implementing CDM projects in the sector and related prospects with respects to the Indian scenario.