Editing Kyoto Protocol (section)

==== 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.