Reducing GHG Emissions : The Kyoto Mechanisms

Reducing GHG Emissions : The Kyoto Mechanisms

The Kyoto Protocol has put in place three flexibility mechanisms to reduce emission of Green House Gases. Although the Protocol places maximum responsibility of reducing emissions on the developed countries by committing them to specific emission targets, the three mechanisms are based on the premise that reduction of emissions in any part of the globe will have the same desired effect on the atmosphere, and also that some developed countries might find it easier and more cost effective to support emissions reductions in other developed or developing countries rather than at home. These mechanisms thus provide flexibility to the Annexure I countries, helping them to meet their emission reduction obligations. Let us take a look at what these mechanisms are.

What are the three flexibility mechanisms put in place by the Kyoto Protocol for reducing GHG emissions ?

The three mechanisms are Joint Implementation, Emissions Trading and Clean Development Mechanism.

What is Joint Implementation?

Through the Joint Implementation, any Annex I country can invest in emission reduction projects (referred to as "Joint Implementation Projects") in any other Annex I country as an alternative to reducing emissions domestically. Two early examples are change from a wet to a dry process at a Ukraine cement works, reducing energy consumption by 53 percent by 2008-2012; and rehabilitation of a Bulgarian hydropower project, with a 267,000 ton reduction of CO2 equivalent during 2008- 012.

What is Clean Development Mechanism ?

The Clean Development Mechanism (CDM) allows a developed country with an emission reduction or emission-limitation commitment under the Kyoto Protocol to implement an emission reduction project in developing countries as an alternative to more expensive emission reductions in their own countries. In exchange for the amount of reduction in emission thus achieved, the investing country

gets Carbon Credits which it can offset against its Kyoto targets. The developing country gains a step towards sustainable development.

To get a CDM project registered and implemented, the investing country has to first take approval from the designated national authority in the host country, establish “Additionality”, define baselines and get the project validated by a third party agency, called a Designated Operational Entity (DOE). The Executive Body of CDM registers the project and issues credits, called Certified Emission Reductions (CERs), or carbon credits, where each unit is equivalent to the reduction of one metric tonne of  CO2 or its equivalent.

There are more than 4200 CDM projects in the pipeline as on 14.3.2010. The expected CERs till the end of 2012 is 2,900,000,000

What is “Additionality” in a CDM project ?

The feature of “additionality” is a crucial element of a CDM project – it means that the industrialized country that is seeking to establish the CDM project in the developing country and earn carbon credits from it has to establish that the planned carbon reductions would not have occurred on its own, in the absence of the CDM project. They have to establish a baseline of the project, which is the emission level that would have been there in the absence of the project. The difference between this baseline level and the (lower) emission level achieved as a result of the project is the carbon credit due to the investing country. Additionality can be with reference to various terms, for example – Emission Additionality- the project should lead to real, measurable and long term GHG mitigation ; Financial Additionality- the funding for the CDM project should not lead to diversion of official development assistance; Technological Additionality- the CDM project activities should lead to transfer of environmentally safe and sound technologies and know how.

What are some of the concerns regarding CDM ?

The risk of "False Credits" is a cause for concern with regard to CDM projects. If a project does not actually offer an additionality, and the reduction in emissions would have happened anyway, even without the project, then the positive effect that the project shows will actually be a false positive, giving the investor an undeserved or spurious credit which can actually cause emissions to rise rather than fall.

What is India's position with regard to CDM projects ?

India has a huge potential for CDM projects in areas like renewable and non renewable energy, manufacturing, chemical industry, transport, waste handling, tourism, agriculture, afforestation, construction etc. As in January 2010, there were a total of 482 CDM projects from India, registered with UNFCCC. This is 23.71 % of all projects from across the world. Total CERs issued to all CDM projects is 373.795 Mn, of which India accounts for 19.92 % at 74.19 Mn. CERs 

What is Emissions Trading ?

Emissions trading is a market based scheme for environmental improvement that allows parties to buy and sell permits for emissions or credits for reductions in emissions of certain pollutants. Under such a scheme, the environmental regulator first determines total acceptable emissions and then divides this total into tradeable units (often called credits or permits). These units are then allocated to scheme participants. Participants that emit pollutants must obtain sufficient tradable units to compensate for their emissions. Those that reduce emissions may have surplus units that they can sell to others that find emission reduction more expensive or difficult.

The Emissions Trading mechanism allows parties to the Kyoto-protocol to buy greenhouse gas emission permits from other countries to help meet their domestic emission reduction targets. Parties with commitments under the Kyoto Protocol (Annexure B countries) have accepted targets for limiting or reducing emissions. These targets are expressed as levels of allowed emissions, or “assigned amounts, “over the 2008-2012 commitment period. The allowed emissions are divided into “assigned amount units” (AAUs). Emissions trading allows countries that have emission units to spare to sell this excess capacity to countries that are over their targets. Carbon is now tracked and traded like any other commodity in the "carbon market." Trading can also be done in units like ERUs (Emission Reduction Units) generated by JI projects, CERs generated by CDM projects etc. Potential buyers of credits are countries / entities that emit more GHG and potential sellers would be entities/ countries with large carbon sinks. Emissions trading schemes may be established as climate policy instruments at the national level and the regional levels, where governments set emissions obligations to be reached by the participating entities. An example is the European Union Emissions Trading Scheme.

What is done to prevent parties from overselling units ?

To prevent parties from overselling units, and subsequently be unable to meet their own emissions 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 per cent of the Party's assigned amount, or 100 per cent of five times its most recently reviewed inventory, whichever is lowest .