Kyoto mechanisms
Kyoto mechanisms refer to the market-based strategies established under the Kyoto Protocol to help industrialized countries reduce greenhouse gas (GHG) emissions. The Protocol introduced three primary mechanisms: emissions trading, joint implementation, and the clean development mechanism (CDM). These tools aim to provide cost-effective opportunities for countries to meet their quantified emission limitations and reduction commitments, ultimately contributing to global climate change mitigation efforts.
Emissions trading allows countries to buy and sell emission allowances, enabling more efficient reductions where they are most economically viable. Joint implementation enables developed countries to invest in emission reduction projects in other industrialized nations, generating emission reduction units (ERUs) that count towards their own targets. The CDM, on the other hand, facilitates investments in developing countries, generating certified emissions reductions (CERs) that can be used by Annex I countries to meet their commitments.
While the Kyoto Protocol remains in effect, it has largely been supplanted by the Paris Agreement, which emphasizes broader participation and more flexible commitments from all nations. The mechanisms were created to recognize the diverse circumstances of countries and to encourage investment and technology transfer, fostering sustainable development in recipient nations.
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Kyoto mechanisms
The Kyoto Protocol established three mechanisms for GHG reduction: emissions trading, joint implementation, and the clean development mechanism. The aim of these mechanisms is to provide additional, cost-effective opportunities for industrialized countries to reduce their emissions of GHGs in order to mitigate climate change. Although it is still in force, the Kyoto Protocol was mostly replaced by the Paris Agreement in 2015.
Background
Article 3 of the Kyoto Protocol requires industrialized countries, identified in Annex I of the UN Framework Convention on Climate Change, to take on quantified emission limitation and reduction commitments (QELRCs). These QELRCs are set out in Annex B to the protocol and require parties listed in Annex I of the convention to reduce their emissions of six specified greenhouse gases (GHGs). Based on individual targets, Annex I parties are assigned the amount of carbon dioxide (CO2) equivalent emission units, called (AAUs), they are allowed to emit during the protocol’s first commitment period (2008-2012). These parties are obliged to meet their targets primarily through domestic measures. However, recognizing the need for flexibility, the protocol established three market-based mechanisms—emissions trading, joint implementation, and the (CDM)—that are meant to provide additional, cost-effective ways for developed countries to meet their commitments.
Implementation and Participation Requirements
The mechanisms are under the authority and guidance of the Conference of the Parties to the Convention serving as the meeting of the Parties to the Protocol (COP/MOP or CMP). The relevant articles in the protocol and decisions of the COP/MOP contain the rules and implementation modalities for the mechanisms. Decision 2/CMP.1 contains some general requirements and provides that use of the mechanisms must be supplemental to domestic actions taken by Annex I parties, with these domestic actions constituting a significant element in Annex I parties’ efforts to meet their targets. The decision further provides that Annex I parties’ eligibility to participate in the mechanisms depends on their compliance with their methodological and reporting obligations under Articles 5 and 7 of the protocol. Participation in the Kyoto mechanisms may involve private or public entities, which must be authorized by a party to the Kyoto Protocol to participate in any of the mechanisms.
Joint Implementation
Under joint implementation, Article 6 of the protocol allows Annex I parties to earn or buy emission reduction units (ERUs) generated from emission reduction or removal projects implemented in other Annex I parties. These ERUs, each representing one metric ton of CO2 equivalent emission reduction, can be used by Annex I parties to contribute to meeting their targets under the protocol. A joint implementation project could, for example, involve installing solar panels in homes in a developed country to replace power generation from fossil fuels. The use of these solar panels will result in reduced GHG emissions, and the investor can use the reductions achieved, issued in the form of ERUs, toward its own reduction target. The joint implementation mechanism is overseen by a supervisory committee.
The protocol sets out some of the eligibility criteria for participating in joint implementation. Article 6.1 provides that joint implementation projects must have the approval of the parties involved and must result in a reduction in emissions by sources, or removal by sinks, additional to what would have occurred in the absence of the project. The detailed participation requirements are set out in the Annex to Decision 9/CMP.1.
Clean Development Mechanism
The CDM was established by Article 12 of the protocol. Under the CDM, Annex I parties can finance or invest in emission reduction or removal projects in developing countries. These projects generate certified emissions reductions (CERs), which Annex I parties can add to their assigned amounts and use toward meeting their targets under the protocol. Again, each CER represents one metric ton of CO2 equivalent emission reduction. A CDM project could involve the same activities as a joint implementation. The only differences would be that the project would be implemented in a developing country, and the emission reductions would be issued as CERs. The CDM is overseen by an executive board.
Article 12 sets out some of the participation requirements for the CDM. It provides for the certification of emission reductions resulting from project activities by operational entities, on the basis of voluntary participation of the parties involved; real, measurable, and long-term benefits related to the mitigation of climate change; and emission reductions additional to those that would have occurred in the absence of the project activity. The Annex to Decision 3/CMP.1 further provides that participants must be parties to the protocol and must designate a national authority. These requirements are additional to the general participation requirements described above.
Emissions Trading
Article 17 of the protocol provides that parties with QELRCs may participate in emissions trading in order to fulfill their Article 3 commitments. involves Annex I parties trading in their AAUs. Here, Annex I parties who have not used up all their AAUs are allowed to sell them to other Annex I parties. These other Annex I parties are generally parties who either have exceeded or believe they will exceed their assigned amounts. Under the emissions trading scheme, Annex I parties can buy or sell any of the emission reduction units, including AAUs, CERs, ERUs, and removal units (RMUs). RMUs are ERUs generated under land use, land-use change, and forestry projects. This trade in emission reduction units or carbon credits has led to the creation of what is called the carbon market, where carbon emissions are traded like other commodities.
The rules governing emissions trading are contained in the Annex of Decision 11/CMP.1. In addition to the general participation requirements, Annex I parties are required to maintain a commitment period reserve of at least 90 percent of their assigned amounts. They are not allowed to make any transfer that would result in their holdings falling below this reserve.
Context
The United Nations recognized that differing circumstances exist in different countries. Some countries may be relatively energy efficient, making it more difficult for them to reduce their GHG emissions sufficiently to meet their targets. In some countries, the potential cost of reducing their emissions may be very high. The need for flexibility was recognized, although the protocol provides that the use of the flexible mechanisms must be supplemental to domestic actions taken by Annex I parties. The Kyoto mechanisms were established to provide this flexibility, to enhance Annex I parties’ ability to achieve their targets, and to provide them with cost-effective means of achieving these targets. In addition, other advantages of the mechanisms include contribution to the of recipient countries through technology transfer and enhanced investment flows. The Kyoto Protocol was superseded by the Paris Agreement in 2016.
Key Concepts
- Annex I parties: industrialized nations listed in of the UNFCCC
- assigned amount units: greenhouse gas emission allowances of Annex I parties
- certified emissions reductions (CERs): credits for contributing to reduced emissions in that Annex I nations can substitute for domestic reductions
- emission reduction units (ERUs): measurement of the amount of GHG emissions reduced by a joint implementation project
- removal units (RMUs): emission reduction units generated by land use, land-use change, and forestry projects
Bibliography
Bassetti, Francesco. "Success or Failure? The Kyoto Protocol's Troubled Legacy." Foresight, 8 Dec. 2022, www.climateforesight.eu/articles/success-or-failure-the-kyoto-protocols-troubled-legacy/. Accessed 19 Dec. 2024.
Freestone, David, and Charlotte Streck. Legal Aspects of Implementing the Kyoto Protocol Mechanisms: Making Kyoto Work. New York: Oxford University Press, 2005.
Grubb, Michael, Christiaan Vrolijk, and Duncan Brack. The Kyoto Protocol: A Guide and Assessment. London: Earthscan, 1999.
Yamin, Farhana, ed. Climate Change and Carbon Markets: A Handbook of Emissions Reductions Mechanisms. London: Earthscan, 2005.