Editing Kyoto Protocol (section)

== Principal concepts ==
Some of the principal concepts of the Kyoto Protocol are:
* Binding commitments for the Annex I Parties. The main feature of the Protocol<ref name="2011 unfccc kyoto protocol overview">{{citation
 | year=2011
 | author=United Nations Framework Convention on Climate Change (UNFCCC)
 | title=Kyoto Protocol
 | publisher=UNFCCC
 | url=http://unfccc.int/kyoto_protocol/items/2830.php
 | access-date=30 December 2011
 | archive-date=16 May 2011
 | archive-url=https://web.archive.org/web/20110516211124/http://unfccc.int/kyoto_protocol/items/2830.php
 | url-status=live
 }}</ref> is that it established legally binding commitments to reduce emissions of greenhouse gases for Annex I Parties. The commitments were based on the Berlin Mandate, which was a part of UNFCCC negotiations leading up to the Protocol.{{sfn|Depledge|2000|p=6}}<ref name="liverman">{{cite journal |last=Liverman |first=D. M. |year=2008 |title=Conventions of climate change: constructions of danger and the dispossession of the atmosphere |url=http://www.environment.arizona.edu/files/env/profiles/liverman/liverman-2009-jhg.pdf |url-status=dead |journal=Journal of Historical Geography |volume=35 |issue=2 |pages=279–296 |doi=10.1016/j.jhg.2008.08.008 |archive-url=https://web.archive.org/web/20140912161138/http://www.environment.arizona.edu/files/env/profiles/liverman/liverman-2009-jhg.pdf |archive-date=12 September 2014 |access-date=10 May 2011 |df=dmy-all}}</ref>{{Rp|290|date=November 2012}}
* Implementation. In order to meet the objectives of the Protocol, Annex I Parties are required to prepare policies and measures for the reduction of greenhouse gases in their respective countries. In addition, they are required to increase the absorption of these gases and utilize all mechanisms available, such as joint implementation, the clean development mechanism and emissions trading, in order to be rewarded with credits that would allow more greenhouse gas emissions at home.
* Minimizing Impacts on Developing Countries by establishing an [[Climate change adaptation|adaptation]] fund for climate change.
* Accounting, Reporting and Review in order to ensure the integrity of the Protocol.
* Compliance. Establishing a Compliance Committee to enforce compliance with the commitments under the Protocol.

=== Flexibility mechanisms ===
The Protocol defines three "[[Flexibility Mechanisms]]" that can be used by Annex I Parties in meeting their emission limitation commitments.<ref>
{{citation
 |chapter-url     = http://www.grida.no/climate/ipcc_tar/wg3/225.htm
 |title           = Executive summary
 |chapter         = Measures, and Instruments
 |last1           = Bashmakov
 |first1          = I.
 |display-authors = etal
 |archive-url     = https://web.archive.org/web/20120117023130/http://www.grida.no/climate/ipcc_tar/wg3/225.htm
 |df              = dmy-all
|archive-date = 17 January 2012
 }}, in {{harvnb|IPCC TAR WG3|2001}}
</ref>{{Rp|402|date=November 2012}} The flexibility mechanisms are International Emissions Trading (IET), the [[Clean Development Mechanism]] (CDM), and [[Joint Implementation]] (JI). IET allows Annex I Parties to "trade" their emissions ([[Assigned amount unit|Assigned Amount Units]], AAUs, or "allowances" for short).<ref>Clifford Chance LLP (2012). "Clean Development Mechanism: CDM and the UNFCC" {{cite web |url=http://a4id.org/sites/default/files/user/CDM%26UNFCCCcorrected.pdf |title=Archived copy |access-date=2013-09-19 |url-status=dead |archive-url=https://web.archive.org/web/20130921060112/http://a4id.org/sites/default/files/user/CDM%26UNFCCCcorrected.pdf |archive-date=21 September 2013 |df=dmy-all }}. Advocates for International Development. Retrieved: 19 September 2013.</ref>

The economic basis for providing this flexibility is that the [[margin (economics)|marginal]] cost of reducing (or abating) emissions differs among countries.<ref name="toth 2001 flexibility mechanisms">
{{citation
 |chapter-url             = http://www.grida.no/climate/ipcc_tar/wg3/441.htm
 |title           = 10.4.4. Where Should the Response Take Place? The Relationship between Domestic Mitigation and the Use of International Mechanisms
 |chapter         = 10. Decision-making Frameworks
 |last1           = Toth
 |first1          = F. L.
 |display-authors = etal
 |url-status         = dead
 |archive-url      = https://web.archive.org/web/20120117032405/http://www.grida.no/climate/ipcc_tar/wg3/441.htm
 |archive-date     = 17 January 2012
 |df              = dmy-all
}}, in {{harvnb|IPCC TAR WG3|2001}}
</ref>{{Rp|660|date=November 2012}}<ref>
{{citation
 |chapter-url             = http://www.grida.no/climate/ipcc_tar/wg3/246.htm
 |title           = 6.3 International Policies, Measures, and Instruments
 |chapter         = 6. Policies, Measures, and Instruments
 |last1           = Bashmakov
 |first1          = I.
 |display-authors = etal
 |url-status         = dead
 |archive-url      = https://web.archive.org/web/20090805204450/http://www.grida.no/climate/ipcc_tar///wg3/246.htm
 |archive-date     = 5 August 2009
 |df              = dmy-all
}}, in {{harvnb|IPCC TAR WG3|2001}}
</ref> "Marginal cost" is the cost of abating the last tonne of {{CO2}}-eq for an Annex I/non-Annex I Party. At the time of the original Kyoto targets, studies suggested that the flexibility mechanisms could reduce the overall ([[aggregate data|aggregate]]) cost of meeting the targets.<ref name="hourcade 2001 economic costs of flexibility mechanisms">
{{citation
 |chapter-url             = http://www.grida.no/climate/ipcc_tar/wg3/341.htm
 |title           = 8.3.1 International Emissions Quota Trading Regimes
 |chapter         = 8. Global, Regional, and National Costs and Ancillary Benefits of Mitigation
 |last1           = Hourcade
 |first1          = J.-C.
 |display-authors = etal
 |url-status         = dead
 |archive-url      = https://web.archive.org/web/20120111150919/http://www.grida.no/climate/ipcc_tar/wg3/341.htm
 |archive-date     = 11 January 2012
 |df              = dmy-all
}}, in {{harvnb|IPCC TAR WG3|2001}}
</ref> Studies also showed that national losses in Annex I [[gross domestic product]] (GDP) could be reduced by the use of the flexibility mechanisms.<ref name="hourcade 2001 economic costs of flexibility mechanisms" />

The CDM and JI are called "project-based mechanisms", in that they generate emission reductions from projects. The difference between IET and the project-based mechanisms is that IET is based on the setting of a quantitative restriction of emissions, while the CDM and JI are based on the idea of "production" of emission reductions.<ref name="toth 2001 flexibility mechanisms" /> The CDM is designed to encourage production of emission reductions in non-Annex I Parties, while JI encourages production of emission reductions in Annex I Parties.

The production of emission reductions generated by the CDM and JI can be used by Annex I Parties in meeting their emission limitation commitments.<ref>
{{citation
 |chapter-url             = http://www.grida.no/climate/ipcc_tar/wg3/247.htm
 |title           = 6.3.2 Project-based Mechanisms (Joint Implementation and the Clean Development Mechanism)
 |chapter         = 6. Policies, Measures, and Instruments
 |last1           = Bashmakov
 |first1          = I.
 |display-authors = etal
 |url-status         = dead
 |archive-url      = https://web.archive.org/web/20120113181950/http://www.grida.no/climate/ipcc_tar/wg3/247.htm
 |archive-date     = 13 January 2012
 |df              = dmy-all
}}, in {{harvnb|IPCC TAR WG3|2001}}
</ref> The emission reductions produced by the CDM and JI are both measured against a hypothetical [[Economics of climate change mitigation#Baselines|baseline]] of emissions that would have occurred in the absence of a particular emission reduction project. The emission reductions produced by the CDM are called [[Certified emission reduction]]s (CERs); reductions produced by JI are called [[emission reduction unit]]s (ERUs). The reductions are called "[[Carbon offsets and credits|credits]]" because they are emission reductions credited against a hypothetical baseline of emissions.<ref>{{Cite book|last=Fernandez Quesada|first=Nicolas|title=Kyoto Protocol, Emissions Trading and Reduction Technologies for Climate Change Mitigation|date=2013|publisher=GRIN Verlag GmbH|isbn=978-3-656-47173-8|location=Munich|oclc=862560217}}</ref><ref>{{Cite book|url=https://books.google.com/books?id=2lqtDwAAQBAJ&pg=PA14 |title=International Conventions on Atmosphere Handbook|publisher=International Business Publications, USA|isbn=9781433066290|pages=14|date=3 March 2008}}</ref>

Only emission reduction projects that do not involve using nuclear energy are eligible for accreditation under the CDM, in order to prevent nuclear technology exports from becoming the default route for obtaining credits under the CDM.

Each Annex I country is required to submit an annual report of inventories of all anthropogenic greenhouse gas emissions from sources and removals from sinks under UNFCCC and the Kyoto Protocol. These countries nominate a person (called a "designated national authority") to create and manage its [[greenhouse gas inventory]]. Virtually all of the non-Annex I countries have also established a designated national authority to manage their Kyoto obligations, specifically the "CDM process". This determines which GHG projects they wish to propose for accreditation by the CDM Executive Board.

==== International emissions trading ====
{{excerpt|Carbon emission trading}}

===== Intergovernmental emissions trading =====
The design of the [[European Union Emissions Trading Scheme]] (EU ETS) implicitly allows for trade of national Kyoto obligations to occur between participating countries.{{sfn|Carbon Trust|2009|p=24}} The Carbon Trust found that other than the trading that occurs as part of the EU ETS, no intergovernmental emissions trading had taken place.{{sfn|Carbon Trust|2009|pp=24–25}}

One of the environmental problems with IET is the large surplus of allowances that are available. Russia, Ukraine, and the new EU-12 member states (the Kyoto Parties Annex I Economies-in-Transition, abbreviated "EIT": Belarus, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Russia, Slovakia, Slovenia, and Ukraine)<ref>{{citation
|title=Development and Climate Change: A Strategic Framework for the World Bank Group: Technical Report
|year=2008
|author=World Bank
|url=http://beta.worldbank.org/overview/strategic-framework-development-and-climate-change
|publisher=The International Bank for Reconstruction and Development / The World Bank.
|location=Washington, DC, USA
|access-date=3 April 2010
|archive-date=24 December 2009
|archive-url=https://web.archive.org/web/20091224213652/http://beta.worldbank.org/overview/strategic-framework-development-and-climate-change
|url-status=dead
}}</ref>{{Rp|59|date=November 2012}} have a surplus of allowances, while many [[OECD]] countries have a deficit.{{sfn|Carbon Trust|2009|p=24}} Some of the EITs with a surplus regard it as potential compensation for the trauma of their economic restructuring.{{sfn|Carbon Trust|2009|p=25}} When the Kyoto treaty was negotiated, it was recognized that emissions targets for the EITs might lead to them having an excess number of allowances.<ref>
{{cite book
 |year            = 2001
 |contribution    = 8.3.1.1 "Where Flexibility"
 |title           = 8. Global, Regional, and National Costs and Ancillary Benefits of Mitigation
 |page            = 538
 |series          = Climate Change 2001: Mitigation. A Contribution of Working Group III to the Third Assessment Report of the Intergovernmental Panel on Climate Change
 |editor          = B. Metz
 |display-editors = etal
 |publisher       = Cambridge University Press
 |last1           = Hourcade
 |first1          = J.-C.
 |url             = http://www.grida.no/climate/ipcc_tar/wg3/341.htm
 |display-authors = etal
 |url-status         = dead
 |archive-url      = https://web.archive.org/web/20120111150919/http://www.grida.no/climate/ipcc_tar/wg3/341.htm
 |archive-date     = 11 January 2012
 |df              = dmy-all
}}
</ref> This excess of allowances were viewed by the EITs as "headroom" to grow their economies.<ref>{{citation
 | year=2003
 | title=Green Investment Schemes: Options and Issues
 | last1=Blyth
 | first1=W.
 | first2=R.
 | last2=Baron
 | page=11
 | publisher=Organization for Economic Cooperation and Development (OECD) Environment Directorate and International Energy Agency (IEA)
 | location=Paris, France
 | url=http://www.oecd.org/dataoecd/48/54/19842798.pdf
 | access-date=16 December 2011
 | archive-date=22 December 2011
 | archive-url=https://web.archive.org/web/20111222054248/http://www.oecd.org/dataoecd/48/54/19842798.pdf
 | url-status=live
 }} OECD reference: COM/ENV/EPOC/IEA/SLT(2003)9</ref> The surplus has, however, also been referred to by some as "hot air", a term which Russia (a country with an estimated surplus of 3.1 billion tonnes of carbon dioxide equivalent allowances) views as "quite offensive".<ref>
{{citation
 |date      = 30 June 2008
 |title     = Energy and Climate Change in Russia (note requested by the European Parliament's temporary committee on Climate Change, Policy Department Economy and Science, DG Internal Policies, European Parliament)
 |last1     = Chiavari
 |first1    = J.
 |first2    = M.
 |last2     = Pallemaerts
 |page      = 11
 |publisher = Institute for European Environmental Policy
 |location  = Brussels, Belgium
 |url       = http://www.ieep.eu/assets/433/ecc_russia.pdf
|archive-url = https://web.archive.org/web/20111222054254/http://www.ieep.eu/assets/433/ecc_russia.pdf
|url-status  = dead
|archive-date = 22 December 2011
}}
</ref>

OECD countries with a deficit could meet their Kyoto commitments by buying allowances from transition countries with a surplus. Unless other commitments were made to reduce the total surplus in allowances, such trade would not actually result in emissions being reduced{{sfn|Carbon Trust|2009|p=25}} (see also the section below on the [[Kyoto Protocol#Green Investment Scheme|Green Investment Scheme]]).

===== "Green Investment Schemes" =====
The "Green Investment Scheme" (GIS) is a plan for achieving environmental benefits from trading surplus allowances (AAUs) under the Kyoto Protocol.<ref name="Definition of Green Investment Scheme (GIS)">{{citation
 | year=2011
 | title=Carbon Finance - Glossary of Terms: Definition of "Green Investment Scheme" (GIS)
 | author=Carbon Finance at the World Bank
 | publisher=World Bank Carbon Finance Unit (CFU)
 | location=Washington, DC, US
 | url=http://go.worldbank.org/HZGVW3QN20
 | archive-url=http://webarchive.loc.gov/all/20100817010146/http://go.worldbank.org/HZGVW3QN20
 | url-status=dead
 | archive-date=17 August 2010
 | access-date=15 December 2011
 }}</ref> The Green Investment Scheme (GIS), a mechanism in the framework of International Emissions Trading (IET), is designed to achieve greater flexibility in reaching the targets of the Kyoto Protocol while preserving environmental integrity of IET. However, using the GIS is not required under the Kyoto Protocol, and there is no official definition of the term.<ref name="Definition of Green Investment Scheme (GIS)" />

Under the GIS a party to the protocol expecting that the development of its economy will not exhaust its Kyoto quota, can sell the excess of its Kyoto quota units (AAUs) to another party. The proceeds from the AAU sales should be "greened", i.e. channelled to the development and implementation of the projects either acquiring the greenhouse gases emission reductions (hard greening) or building up the necessary framework for this process (soft greening).{{sfn|Carbon Trust|2009|p=25}}

===== Trade in AAUs =====
Latvia was one of the front-runners of GISs. World Bank (2011)<ref name="world bank 2011 trade in aaus">{{citation
 | year=2011
 | author=World Bank
 | title=State and Trends of the Carbon Market Report 2011
 | url=http://siteresources.worldbank.org/INTCARBONFINANCE/Resources/State_and_Trends_Updated_June_2011.pdf
 | publisher=World Bank Environment Department, Carbon Finance Unit
 | location=Washington, DC, USA
 | access-date=26 January 2012
 | archive-date=25 March 2020
 | archive-url=https://web.archive.org/web/20200325045048/http://siteresources.worldbank.org/INTCARBONFINANCE/Resources/State_and_Trends_Updated_June_2011.pdf
 | url-status=live
 }}</ref>{{Rp|53|date=November 2012}} reported that Latvia has stopped offering AAU sales because of low AAU prices. In 2010, Estonia was the preferred source for AAU buyers, followed by the Czech Republic and Poland.<ref name="world bank 2011 trade in aaus" />{{Rp|53|date=November 2012}}

Japan's national policy to meet their Kyoto target includes the purchase of AAUs sold under GISs.<ref>{{citation
 | date=28 March 2008
 | author=Government of Japan
 | title=Kyoto Protocol Target Achievement Plan (Provisional Translation)
 | url=http://www.env.go.jp/en/earth/cc/kptap.pdf
 | publisher=Ministry of the Environment, Government of Japan
 | location=Tokyo, Japan
 | pages=81–82
 | access-date=26 January 2012
 | archive-date=20 April 2012
 | archive-url=https://web.archive.org/web/20120420003913/https://www.env.go.jp/en/earth/cc/kptap.pdf
 | url-status=live
 }}</ref> In 2010, Japan and Japanese firms were the main buyers of AAUs.<ref name="world bank 2011 trade in aaus" />{{Rp|53|date=November 2012}} In terms of the international carbon market, trade in AAUs are a small proportion of overall market value.<ref name="world bank 2011 trade in aaus" />{{Rp|9|date=November 2012}} In 2010, 97% of trade in the international carbon market was driven by the [[European Union Emission Trading Scheme]] (EU ETS).<ref name="world bank 2011 trade in aaus" />{{Rp|9|date=November 2012}}

===== Clean Development Mechanism =====
Between 2001, which was the first year [[Clean Development Mechanism]] (CDM) projects could be registered, and 2012, the end of the first Kyoto commitment period, the CDM is expected to produce some 1.5&nbsp;billion tons of carbon dioxide equivalent (CO<sub>2</sub>e) in emission reductions.{{sfn|World Bank|2010}} Most of these reductions are through [[renewable energy commercialisation]], [[efficient energy use|energy efficiency]], and fuel switching (World Bank, 2010, p.&nbsp;262). By 2012, the largest potential for production of CERs are estimated in [[China]] (52% of total CERs) and India (16%). CERs produced in Latin America and the Caribbean make up 15% of the potential total, with Brazil as the largest producer in the region (7%).

===== Joint Implementation =====
The formal crediting period for [[Joint Implementation]] (JI) was aligned with the first commitment period of the Kyoto Protocol, and did not start until January 2008 (Carbon Trust, 2009, p.&nbsp;20).{{sfn|Carbon Trust|2009}} In November 2008, only 22 JI projects had been officially approved and registered. The total projected emission savings from JI by 2012 are about one tenth that of the CDM. Russia accounts for about two-thirds of these savings, with the remainder divided up roughly equally between Ukraine and the EU's New Member States. Emission savings include cuts in methane, HFC, and N<sub>2</sub>O emissions.