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Emissions Trading and Flexible Mechanisms
according to Kyoto Protocol
After years of negotiation, the
Kyotop protocol was passed in 1997 and paved the way for a
world-wide climate protection policy. The aim was to reduce
the greenhouse gas emissions. Several industrialized countries
and newly industrialized countries (the so-called Annex-I
countries) have agreed to reduce their greenhouse gas
emissions by 5 per cent between 2008 and 2012. The aim is to
surpass the 1990 emissions by 5 per cent. With 92 per cent of
the emissions this aim was set for Germany and the European
Union in 1990. Within the so-called EU Burden Sharing, Germany
has agreed on reducing the emissions by 21 per cent.
Developing countries are excepted from reduction obligations.
In addition to carbon dioxide,
the Kyoto Protocol considers methane, nitrous oxide, as well
total as partly fluorinated hydrocarbons and sulfurhexafluorid
as greenhouse gas emissions. Their different effects on
the climate paved the way for the introduction of the Global
Warming Potential (GWP), which means that the effectiveness of
a particular unit of a climate gas is related to the
effectiveness of the same unit of CO2. Therefore,
CO2 can be said to have a Global Warming Potential
of 1. The GWP of methane equals approximately 21, for the
other greenhouse gases the GWPs are considerably higher.
The Kyoto protocol will come
into effect when the following conditions are met: 1.) It must
be ratified by at least 55 countries. 2.) The Annex I
countries to ratify the treaty must be responsible for 55% of
the emissions. This aim is not achieved at present, because
neither Russia nor the U.S.A. have ratified the treaty.
Political efforts, especially on behalf of the E.U., are
currently aiming at Russia’s ratification and thus putting
the Kyoto Protocol into practice.
In order to meet the obligation
of reduction, emissions can be traded between Annex-I
countries. However, trading will not only take place on a
nation-wide level. On the contrary, the individual countries
identify industrial sectors that are particularly marked for
greenhouse gas, and whose enterprises receive a certain amount
of continually decreasing emission rights. The enterprises are
obliged to exhaust only as much greenhouse gas as they have
agreed on. If the emissions of a company are higher than the
emission rights, the company can buy emission rights from
other companies that do not need their total. This procedure
will lead to the realization of reductive measures wherever
they are most convenient. The companies therefore have the
choice between taking their own measures for reducing the
emissions or buying more options. The decision will always
rely on their own measures as long as they undercut the
current market price for emission rights. The emissions
trading mechanism on the company level will come into effect
in the course of the EU emissions trading system starting in
2005.
Apart from reducing their own emissions, the
companies have other mechanisms to improve their emission
balance. By means of so-called project-related measures,
emission certificates can be generated. In this connection a
company invests in an emission-reducing project and receives a
credit note in the form of certificates. The two mechanisms to
differentiate are the so-called Joint Implementation (JI) and
the Clean Development Mechanism (CDM). JI refers to
emissions-reduction projects that invest in another Annex-I
country. CDM means that the investment is related to a country
outside the Annex-I countries. |
