Kyoto Mechanisms

under the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC), industrialized countries committed to reduce their greenhouse gas emissions by an average of minus 5.2 percent relative to their 1990 level emissions by 2008-12. To assist countries in attaining these reduction targets, the protocol created three flexible mechanisms. These mechanisms allow countries with reduction commitments to achieve their targets by acquiring credits from emissions reduced or avoided in other countries, where it may be more cost-effective to do so. The three mechanisms of the Kyoto Protocol are: Emissions Trading, Joint Implementation, and the Clean Development Mechanism. In this way, a country or a private or public entity within a country that reduces or avoids emissions more than it is required, may sell its emission reductions as credits to another country or entity that has not reduced its own emissions. Because greenhouse gases, in contrast to local pollutants, are uniformly distributed in the atmosphere within a week, it does not matter where the source of emissions is located. However, the cost of reducing or avoiding emissions may vary greatly.

Only countries with emission reduction targets under the protocol have "quantified emission limitation and reduction commitments," known as QELRCs, calculated and quantified as an "assigned amount." The total amount of emissions that each country with QELRCs can release 2008-12 (the first commitment period) must not exceed its assigned amount. Because emissions fluctuate from year to year, depending on the weather and economic cycles, an average over several years was chosen to check compliance with the reduction commitments. These are restrictions on a country's level of emissions, based on voluntarily adopted targets that collectively amount to a slightly more than 5 percent reduction relative to emissions in 1990. If a party exceeds its reduction target by cutting back on its emissions more than the amount specified in its QELRCs, it might sell its excess units or, under some circumstances, carry them over to the next commitment period. The QELRCs cover emissions of six greenhouse gases including: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), Hydrofluorcar-bons (HFCs), Perfluorocarbons (PCFs), and Sulfur hexafluoride (SF6).]

A total of 39 countries have QELRCs, and they are listed in Annex B of the protocol with their respective targets. They are referred to as Annex I parties because they are also listed in Annex I of the UNFCCC, including: Australia, Austria, Belgium, Bulgaria, Canada, Croatia, Czech Republic, Denmark, Estonia, European Community, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Latvia, Liechtenstein, Lithuania, Luxembourg, Monaco, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Russian Federation, Slovakia, Slovenia, Spain, Sweden, Switzerland, Ukraine, United Kingdom, and United States. The European Community as a group is also a party, and the countries that compose it have internally redistributed their assigned amounts to collectively achieve their targets. The United States and Australia have not ratified the protocol, even though they agreed to specific reduction targets like the other Annex I parties did in 1997 when the protocol was adopted. Therefore, they are parties to the UNFCCC, but are not parties to the Kyoto Protocol and cannot participate in its mechanisms.

Because global warming is a result of accumulated emissions in the atmosphere, and non-indus trialized countries have historically contributed little to the problem, developing countries do not have reduction commitments under the protocol. This is inscribed as one of the fundamental principles of the UNFCCC, which acknowledges that countries should act "in accordance with their common but differentiated responsibilities and respective capabilities and their social and economic conditions." It was therefore agreed that industrialized countries, which have greater responsibility and capability, should take the lead in reducing emissions.

AccouNTING uNDER FLExiBLE MEcHANISMS

The Kyoto Protocol does not bestow any "right, title or entitlement" to emit, and requires that domestic action constitute a "significant element" of Annex I parties' efforts to achieve their reduction targets, with the use of mechanisms only "supplemental to domestic action." To ensure that emission reductions bought and sold through the flexible mechanisms are measurable and real, the protocol establishes specific rules and accounting procedures for each of the flexible mechanisms. Emission reductions under any of the three flexible mechanisms generate a specific kind of unit that may be added to or subtracted from a party's assigned amount. Each unit is equal to one metric ton of emissions. All units are fungible, but have different names so they can be traced in the International Transaction Log, kept by the UNFCCC secretariat.

Under Emissions Trading, Annex I parties may trade assigned amount units (AAUs) issued on the basis of their assigned amount, or Removal Units (RMUs) issued on the basis of land use, land-use change, and forestry (LULUCF) activities (also known as carbon sinks), with other Annex I parties. They may also trade units acquired under the other flexible mechanisms. Because trading in emissions may be highly profitable, and given that enforcement of compliance under an international environmental regime could be weak, countries agreed to maintain in their inventories a certain level of credits, called the commitment period reserve. Emissions-trading is set out in Article 17 of the Kyoto Protocol.

Joint Implementation (JI) refers to credits acquired from projects that reduce or avoid emissions or enhance removals by sinks undertaken mainly in countries with economies in transition (EITs), namely central and eastern European countries that were part of the former Soviet Union. These countries are also Annex I countries, and have reduction commitments under the protocol. Credits traded under JI are recorded as Emission Reduction Units (ERUs). Because both parties involved in the transaction have reduction commitments and are therefore required to report on their overall level of emissions, the rules applied are less complicated than for Clean Development Mechanism (CDM) projects, where the host country has no reduction commitments. The basic principles of JI are defined in Article 6 of the Kyoto Protocol.

The CDM is similar to Joint Implementation in that both involve undertaking specific project activities. However, the CDM allows countries with reduction commitments to invest in a developing country in projects that reduce or avoid emissions, or enhance removals by sinks, and to use the resulting credits to meet its commitments. The CDM, therefore, is the only mechanism with a worldwide reach, and its purpose is twofold: to contribute to sustainable development in developing countries, and to make it easier for countries with reduction commitments to achieve their targets. The CDM is supposed to orient the future development of the less industrialized countries down a more sustainable path, and to prepare developing countries to contribute to mitigation without undertaking binding commitments.

The credits acquired under the CDM are called Certified Emissions Reductions (CERs). If resulting from afforestation and reforestation projects (the only two sink activities allowed), they are either temporary or long-term CERs (tCERs or lCERS). A levy of 2 percent of the number of CERs issued for every project is to go to an adaptation fund for vulnerable countries. Projects undertaken in the Least Developed Countries (LDCs), as well as small-scale projects, are exempt from this levy. Because the market offer is potentially unlimited, and developing countries have no reduction commitments, both seller and buyer have an incentive to inflate the emission reductions achieved. Therefore, to ensure transparency and accountability, the mechanism is subject to control by the CDM Executive Board, which, in turn, responds to the governing body of the Kyoto Protocol, the Conference of the Parties serving as the Meeting of the Parties (COP/MOP).

To participate in the mechanisms, Annex 1 parties must meet certain eligibility requirements. These include: ratifying the protocol; calculating their assigned amount; having a national system for estimating emissions and removals of greenhouse gases within their territory; putting in place a national registry to record and track the creation and movement of tradable units; and reporting annually on emissions and removals to the UNFCCC secretariat. The Facili-tative Branch of the Compliance Committee oversees conformity with these requirements. Most of the rules and modalities that govern the mechanisms were established in a package of decisions known as the Marrakesh Accords, which resulted after many difficult political issues were agreed on in Marrakesh in 2001. They were adopted, along with the Kyoto Protocol, at the first session of the COP/MOP in Montreal in December 2005.

SEE ALSo: Clean Development Mechanism; Emissions Trading; Framework Convention on Climate Change; Kyoto Protocol.

BIBLIoGRAPHY. "Kyoto Protocol Mechanisms," UNFCCC, www.unfcc.int (cited November 2007); Farhana Yamin and Joanna Depledge, The International Climate Change Regime: A guide to Rules, Institutions and Procedures (Cambridge University Press, 2004).

Mari'a Gutierrez International Institute for Sustainable Development

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