In order to promote CO2 emission reductions at the local level, the Ministry of Environment of the State of Hamburg, Germany, in 2001 initiated the “Hamburg CO2 Competition” together with the Hamburgische Electricitäts-Werke AG (HEW), the local utility. This proactive step contrasted with activities at the federal level where decision makers were quite hesitant to adopt concrete actions to tackle climate change. A total of 175,000 Euro were made available to buy CO2 emission reductions from projects in Hamburg. The calculation of the latter was based on the rules for the project-based Kyoto mechanisms—Joint Implementation (JI) and Clean Development Mechanism (CDM). This paper describes the structure of the Competition and provides an overview of the lessons learnt regarding implementation and monitoring. It shows how local players, including local authorities, can initiate the implementation of emission reduction instruments without federal agencies taking the lead.