UNFCCC THE KYOTO PROTOCOL MECHANISMS

1 United Nations Framework Convention on Climate ChangeTHE KYOTO PROTOCOL MECHANISMSUNFCCCINTERNATIONAL EMISSIONS TRADINGCLEAN DEVELOPMENT MECHANISMJOINT IMPLEMENTATIONThe central feature of the KYOTO PROTOCOL is its requirement that countrieslimit or reduce their greenhouse gas emissions. By setting such targets,emission reductions took on economic value. To help countries meettheir emission targets, and to encourage the private sector and developingcountries to contribute to emission reduction efforts, negotiators of theProtocol included three market-based MECHANISMS emissions trading,the clean development mechanism and joint KYOTO PROTOCOL MECHANISMSThe participants in the carbon market.

2 Private sector, Companies with binding emission reduction obligations Companies with voluntary commitments Emission-reduction project developers Banks Investment firms Brokerages Law firms Accounting firms Technology developers ConsultantsPublic sector, Multi-lateral development banks, such as the World Bank Government agencies UN agencies Non-governmental organizationsGHG EMISSIONS A NEW COMMODITYWith ratification of the KYOTO PROTOCOL , emitting greenhousegases over a set limit entails a potential cost. Conversely, emittersable to stay below their limit hold something of potential , a new commodity was created emission reductions.

3 Because carbon dioxide is the principal greenhouse gas, peoplespeak simply of trading in carbon. Carbon is now tracked andtraded like any other TARGETSCLEAN DEVELOPMENTMECHANISM(CDM)Article 12 of the KYOTO ProtocolThe CDM allows emission-reduction (or emission removal) projects in developing countries to earn certified emissionreduction (CER) credits, each equivalent to one tonne of CERs can be traded and sold, and used by industrializedcountries to a meet a part of their emission reduction targetsunder the KYOTO mechanism stimulates sustainable development and emission reductions, while giving industrialized countries some flexibility in how they meet their emission reduction limitation projects must qualify through a rigorous and public registration and issuance process designed to ensure real, measurable and verifiable emission reductions that are additional to what would have occurred without the mechanism is overseen by the CDM Executive Board.

4 Answerable ultimately to the countries that have ratified theKyoto PROTOCOL . The mechanism is seen by many as a trailblazer. It is the firstglobal, environmental investment and credit scheme of its kind,providing a standardized emissions offset instrument, KYOTO PROTOCOL MECHANISMSINTERNATIONAL EMISSIONS TRADING (IET)Article 17 of the KYOTO PROTOCOL Countries with commitments under the KYOTO PROTOCOL can acquire emission units from other countries with commitmentsunder the PROTOCOL and use them towards meeting a part oftheir targets. An international transaction log, a software-based accounting system, ensures secure transfer of emission reductionunits between countries.

5 The KYOTO PROTOCOL spurred the creation of the European UnionEmissions Trading Scheme, and many people foresee the growthand linking of emissions markets IMPLEMENTATION (JI)Article 6 of the KYOTO ProtocolThrough the JI mechanism, a country with an emission-reductionlimitation commitment under the KYOTO PROTOCOL may take partin an emission-reduction (or emission removal) project in anyother country with a commitment under the PROTOCOL , and countthe resulting emission units towards meeting its KYOTO projects earn emission reduction units (ERUs), each equivalentto one tonne of CO2. As with the CDM, all emission reductionsmust be real, measurable, verifiable and additional to what wouldhave occurred without the project.

6 Under JI there are two tracks by which projects can apply forapproval: Party-varification and international independent bodyvarification. The mechanism is overseen by the JI SupervisoryCommittee, which answers ultimately to the countries that haveratified the APPROVALB efore a project will be recognized as a CDM or JI project, theproject participants must receive a letter of approval from thehost country. Likewise, project participants require a letter ofauthorization. A list of designated national authorities underCDM is available at < >, and a list of countries designated focal points under JI is availableat < >.THIRD-PARTY OVERSIGHTI ndependent, third-party validation or determination of project design documents and verification and certification of emission reductions is a key feature of the CDM and JI.

7 A list of accredited designated operational entities under CDMis availablie at < >, and a list of accredited independent entities under JI is available at < >.UNFCCCTHE KYOTO PROTOCOL MECHANISMSE missionswithprojectswithoutprojectsCDM certified emission reductions (CERs) or JI emission reduction units (ERUs)Emissions trading simplified How a CDM or JI project generates tradable emission unitsEmissionallowancesEmissionscapEmiss ionscapEmission units / credits neededEmission allowances to sellEmitter AEmitter BDownward pressure on emissions 2007 UNFCCCU nited Nations Framework Convention on Climate ChangeAll rights reservedThis brochure is issued for public information purposes and is notan official text of the Convention in any legal or technical sense.

8 Unless otherwise noted in captions, all matter may be freely reproduced in part or in full, provided the source is acknowledged. Mention of firm names and commercial products does not implythe endorsement of the Climate Change from sustainably managed forests (FSC)United Nations Framework Convention on Climate ChangeFor further information contact:Climate Change Secretariat ( UNFCCC ) Martin-Luther-King-Stra e 8 53175 Bonn, GermanyTelephone +49. 228. 815 10 00 Telefax +49. 228. 815 19 99