Review of Kyoto Protocol and Its Impact on India

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  • Topic: Kyoto Protocol, Carbon credit, Carbon finance
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  • Published : February 11, 2013
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The KYOTO Protocol

The Kyoto protocol is an international agreement linked to the United Nations Framework Convention on Climate Change. The major feature of the Kyoto protocol is that it sets binding targets for 37 industrialized countries and the European community for reducing greenhouse gas (GHG) emissions. These amount to an average of five percent against 1990 levels over the five year period 2008-2012. The major difference between the Protocol and the Convention is that while the Convention encouraged industrialized countries to stabilize CHG emissions, the Protocol commits them to do so 1.

Recognizing that developed countries are principally responsible for the current high levels of GHG emissions in the atmosphere as a result of more than 150 years of industrial activity, the Protocol places a heavier burden on developed nations under the principle of “common but differentiated responsibilities (Kyoto Protocol, 2012).

The Kyoto Mechanisms

Under the treaty, countries must meet their targets primarily through national measures. However, the Kyoto protocol offers them an additional means of meeting their targets by way of three market-based mechanisms. The Kyoto mechanisms are:

1.Emissions Trading:

Parties (countries) with commitments under the Kyoto protocol have accepted targets for limiting or reducing emissions. These targets are expressed as levels of allowed emissions or “assigned amounts” which are further divided into “assigned amount units” (AAUs) 2.

Emissions trading allows countries that have emission units to spare – emissions permitted to them but not “used” – to sell this excess capacity to countries that are over their targets. Thus, a new commodity was created in the form of emission reductions. Since carbon dioxide is the principle green house gas, people speak simply of trading in carbon. Carbon is now tracked and traded like any other commodity. This is known as the “carbon market” (Emissions Trading, 2012).

The other units which may be transferred under the scheme, each equal to one tonne of CO2, may be in the form of:

A removal unit (RMU) on the basis of land use, land-use change and forestry activities such as reforestation •An emission reduction unit (ERU) generated by a joint implementation project •A certified emission reduction (CER) generated from a clean development mechanism activity

In order to address the concern that parties could “oversell” units and subsequently be unable to meet their own targets, each party is required to maintain a reserve of ERUs, CERs, AAUs and/or RMUs in its national registry. This reserve known as the “commitment period reserve” should not drop below 90 percent of the party’s assigned amount or 100 percent of five times its most recently reviewed inventory, whichever is lowest (Emissions Trading, 2012).

2.Joint Implementation:

Joint implementation allows a country with an emission reduction or limitation commitment under the Kyoto protocol (Annex B Party) to earn ERUs from an emission reduction project in another Annex B Party, each equivalent to one tonne of CO2, which can be counted towards meeting its Kyoto target. It offers Parties a flexible and cost-efficient means of fulfilling a part of their Kyoto commitments, while the host Party benefits from foreign investment and technology transfer 3.

3.Clean Development Mechanism:

The Clean Development Mechanism (CDM) allows a country with an emission-reduction commitment under Kyoto Protocol (Annex B Party) to implement an emission-reduction project in developing countries. Such projects can earn saleable CER credits, each equivalent to one tonne of CO2, which can be counted towards meeting Kyoto targets. It is the first global, environmental investment and credit scheme of its kind, providing a standardised emissions offset instrument, CERs 4.

To participate in the mechanisms, Parties must meet among others, the following eligibility requirements: •They must...
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