KYOTO TRADING MECHANISMS

The CDM (Article 12 of the Protocol) is a mechanism designed to generate emissions reductions credits for Annex I countries that finance projects in non-Annex I countries who are Party, i.e., Canada financing an energy efficiency project in China, Japan financing a renewable energy project in Morocco, etc. These projects must have the approval of the CDM Executive Board, and in addition to generating measurable emissions reductions against a business-as-usual baseline (they must have ‘additionality’), they should be designed to contribute to sustainable development in the developing country partners.

Joint Implementation: Article 3 of the Protocol allows industrialized countries with emissions reductions targets to cooperate in meeting them, and is generally referred to as Joint Implementation. For example, German-financed energy efficiency projects in Russia, or Norwegian-financed renewable energy projects in Hungary which generate emissions reductions, can be credited to the country which finances them. In theory, this is a more economically efficient means for generating the same overall emissions reductions for industrialized countries.

The Kyoto trading mechanisms rely on a robust and ‘leak-proof’ architecture including national accounting systems and a system of international controls to ensure that the actual overall emissions reductions targets are achieved. The CDM to some extent lies outside this architecture as it relies on ensuring that projects in developing countries reduce emissions from a hypothetical baseline. Unlike trading and JI, it also permits Annex B Parties to increase their overall allowed emissions. These twin problems mean that there is an acute need to ensure that project methodologies for the CDM are watertight and achieve real climate benefits.

Much of the wrangling over the past seven years has been over the question of maintaining the integrity of this architecture and to resist efforts to weaken it. The result is less than perfect, but overall provides a solid basis upon which the future of the climate regime can be built. Its greatest weakness is the mixing of fossil carbon emissions and organic carbon stocks, so called ‘carbon sinks’, which result in more fossil carbon being introduced into the biosphere in the name of emissions reductions. The future of the Land Use, Land Use Change and Forestry (LULUCF) accounting system will be one of the major factors in future negotiations(1).

 

(1) Note on Sinks: Under the terms of the Kyoto Protocol certain kinds of land use change and forestry activities which can sequester carbon are allowed to be counted toward meeting emissions reduction obligations under the Protocol. The theory is that if a ton of carbon is stored in a tree (a so called ‘sink’ for carbon) and hence removed from the atmosphere, then a country would be allowed to add a ton of carbon to its allowed emissions of carbon from the burning of fossil fuels. This whole theory that creating ‘sinks’ in forests, plants and soils, whereby carbon dioxide is taken out of the climate system to offset higher fossil fuel emissions is, according to Greenpeace, quite wrong. Unfortunately, carbon stored in trees is not permanently removed from the atmosphere and there is a high probability that the ton of carbon counted as stored in the tree will find its way back into the atmosphere eventually. The result of this is that the burden of reducing emissions is simply shifted to future generations.
The main point, however, is that the use of sinks must not divert any political and financial resources away from the primary task: to reduce emissions resulting from the burning of fossil fuels. Sinks do not even “buy us time”, as some have argued. If the industrialized countries do not achieve major emission reductions in the near term, we may lose our ability to avoid dangerous climate change, by anyone’s definition. The goal of the Protocol is to reduce emissions, not to create mechanisms for avoiding reductions. Greenpeace seeks to minimize the use of sinks in the Protocol as much as possible, and notes that a number of countries have already pledged that they will not take advantage of this loophole.

 

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