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Kyoto Offsetting Programmes
The Kyoto Protocol
The Kyoto Protocol is an agreement made under the United Nations Framework Convention on Climate Change (UNFCCC) which commits those industrialised nations that have ratified the protocol to reduce their emissions of six greenhouse gases by 5% from 1990 levels in the period 2008 to 2012.
In order to assist nations to reduce carbon emissions to the required level, each country should strive to make greenhouse gas reductions by making improvements in energy efficiency and trading in energy from non fossil fuel sources. Additionally, the Kyoto Protocol sets out a number of trading mechanisms to assist countries in reaching the required level:
- Some countries are permitted to participate in carbon emissions trading – that means countries which are able to do better than their targets are able to sell surpluses (known as credits) to other countries which are finding it more difficult to meet their targets.
- If a country fails to meet its carbon emissions target, it must make up the difference in the second commitment period, plus a penalty of 30%.
The Kyoto Protocol came into effect in February 2005 and has been ratified by 175 countries which are responsible for more than 60% of global greenhouse gas emissions.
The Clean Development Mechanism (CDM)
The Kyoto Protocol does not place carbon emissions limits on developing nations such as China and India. However, these countries are experiencing massive industrial growth resulting in significant increases in carbon emissions. The Kyoto Protocol has established the CDM which allows industrialised countries with Kyoto targets to provide financial support to projects that will reduce greenhouse gas and carbon emissions in developing countries, in return for counting the savings towards their own Kyoto targets.
The developing countries benefit both from the financial investment and the technology which enables them to develop their industries in a more energy efficient way. This flexibility assists industrialised nations in achieving emission reductions in a cost-effective way since labour, trading and land costs are generally lower in the developing countries.
The Clean Development Mechanism is managed by an executive board which determines which projects meet its qualification requirements. Projects which qualify are granted Certified Emission Reductions (CERs). Each CER:
- Is equivalent to one tonne of carbon dioxide
- Can be sold independently, regardless of what else the project produces, e.g. a renewable energy project can sell electricity and CERs.
CERs boost a project’s income and make it economically feasible.
To meet the CDM requirements and be granted CERs, a project must demonstrate:
- A measurable and sustainable ability to reduce greenhouse gas emissions.
- That these reductions could not occur without the support of the CDM payments (the additionality principle).
Joint Implementation
Similar to the CDM, Joint Implementation is a further Kyoto mechanism which allows industrialised countries to meet some of their greenhouse gas emission reductions by trading in energy efficiency and renewable energy projects with other industrialised countries. Generally this means projects in Eastern Europe and the former Soviet states being sponsored by other industrialised countries.
The host country benefits from investment and access to technology while the sponsoring country benefits by being able to make GHG emissions reductions at a lower cost than it could by sponsoring the same project at home.
Joint Implementation projects must meet similar qualification standards and additionality principles as CDM projects. Qualifying projects are awarded Emission Reductions Units (ERUs) – each ERU is equivalent to one tonne of carbon dioxide and ERUs can be sold to other industrialised nations to help them achieve their Kyoto targets.