How it works
Developed countries must meet their targets primarily through national measures. In addition, they can use three market-based mechanisms:
- Emissions trading
Creates a ‘Carbon market’ that provides economic incentives for achieving reductions in greenhouse gas emissions. Caps are set for the period from 2008-12 for each developed country in line with their reduction targets. As well as making domestic emissions reductions, countries can trade Assigned Amount Unit (AAU) allowances - each representing one tonne of emissions - to achieve their cap. - Clean Development Mechanism (CDM)
Developed countries may also invest in or purchase Certified Emissions Reduction credits (CERs) from projects that reduce emissions in developing countries. This offers an alternative to more expensive emission reductions in their own countries. - Joint Implementation (JI)
Developed countries can invest in emission reduction projects in any other developed country as an alternative to reducing emissions domestically. This creates tradeable allowances called ERUs.
Under the Kyoto Protocol, countries’ actual emissions have to be monitored and precise records have to be kept of any trades.
There is also an Adaptation Fund to help developing countries (that are Parties to the Protocol) to adapt to the adverse effects of climate change. The Fund is financed mainly through a 2% levy on the proceeds of Clean Development Mechanism (CDM) project activities.
By the end of 2012, a new international ratified framework is needed to deliver the large emission reductions that the
Intergovernmental Panel on Climate Change (IPCC) says are necessary.
Background
The Protocol is linked to the United Nations Framework Convention on Climate Change (UNFCC) – but the major difference is that Protocol commits countries to action, where the Convention did not.
The Kyoto Protocal became legally-binding on 16 February 2005, after more than 55 Parties to the Convention had ratified the Protocol (including countries responsible for at least 55% of industrialised countries CO2 emissions in 1990). 184 Parties of the Convention have ratified the Kyoto Protocol to date.
For news on the Kyoto Protocol, visit the UNFCCC website.