Emission Trading As Green Solution: Legal Perspective

There’s a market growing in the United States, but unlike markets that trade in tangible commodities, this one trades in the absence of something no one wants: greenhouse gases in the atmosphere. Hundreds of companies make it possible for individuals, organizations, businesses, and even events such as rock music festivals to proclaim themselves carbon-neutral by paying someone else to reduce their emissions. Worried about your carbon footprint? No problem. For fees of US$2–50 per ton of “avoided emissions,” an offset provider will funnel your money into an activity or technology that keeps greenhouse gases out of the atmosphere. The question is, are offset buyers really getting what they paid for?

This paper examines the potential for Domestic Offset Projects (DPs) in climate protection in Germany. DPs are unilateral GHG emissions reduction projects carried out in a country with a binding greenhouse gas emission reduction target under the Kyoto Protocol (Annex I Country). In contrast to the well known project-based mechanisms under the Kyoto Protocol – the Clean Development Mechanism (CDM) and Joint Implementation (JI) – Domestic Offset Projects are located in the same country as the investor. Therefore tradable emission reduction certificates for DPs are issued by the investor's domestic authority. This paper presents possible implementation options for DPs based on JI and CDM experience, as well as possible implementation problems. Policy additionality seems to be an especially crucial requirement and thus was analysed in more detail. In addition, the emission reduction potential resulting from DPs was estimated for the Federal state of Baden-Württemberg, in South-West Germany. Here, it is shown that the scope for DPs is restricted because of the extent of the German climate program. In Baden-Württemberg only some DPs and JI activities fulfil the criterion of policy additionality. For this reason, DPs are probably of more interest in Annex-I countries with a more limited climate policy mix.

The cost efficiency of Kyoto flexible mechanisms: a top-down study with the GEM-E3 world model

The Kyoto Protocol is an international agreement that aims to reduce emissions of greenhouse gases by 5.2% compared with 1990 levels during the commitment period (2008-2012). Developed countries with commitments under the Kyoto Protocol to limit or reduce GHG emissions (Annex I Parties) must meet their targets primarily through national measures. However, to help these countries meet their targets in a cost-effective way, the Kyoto Protocol introduced three market-based mechanisms, thereby creating what is now known as the “carbon market”. The so-called “flexible” mechanisms are: Emissions Trading, the Clean Development Mechanism (CDM) and Joint Implementation (JI). The CDM allows a country to implement an emission-reduction project in developing countries that can earn saleable certified emission reduction (CER) credits, each equivalent to one tonne of CO2, which can be counted towards meeting Kyoto targets. The CDM stimulates both emission reductions and sustainable development through investment and technology transfer. Therefore, it is very important to analyze its contribution to both objectives. While the contribution of CDM to emission reductions at minimum cost seems positive, its contribution to sustainable development has been often relegated to the background. New mechanisms will replace or coexist with the CDM in the post Kyoto period (2013-2020), and it would be desirable that they could contribute to sustainable development and biodiversity conservation more effectively than the CDM.

Under the United Nations Framework Convention of Climate Change (UNFCCC) reductionof Green House Gas (GHG) emissions become a global good with shared and differentiatedresponsibility vested with member countries. The Kyoto Protocol was adopted in 191)7 asthe legally hinding instrument to achieve the objectives of UNFCCC. This protocolintroduced three controversial mechanisms namely Joint Implementation (11. Article 6).Clean Development Mechanism (CDM, Article 12) and the emission trading (Article J 7) furthe establishment of markets for GHG emission reduction. Under the Annex I of UNFCCC countries are obliged to reduce their GHG by 5.2'7< fromthe total 1990 level. Global commitments under the common but di Ilcrentiatcdresponsihility principle of UNFCCC for reducing the emissions vary and depends on thecountry's level of emission. Accordingly Annex I countries were given emission reductiontargets c.g. Japan 6Lk. EU 8L.k. and US 7CJL. This issue has drawn attention or the developedcountries since it could alter their lifestyles drastically. The flexible mechanism permitsdeveloped countries to purchase GHG emission potential from developing countries Selling GHG emission potential (although an income source) has been viewed as sellingdevelopment potential of developing countries. This puts the developing countries in adilemma in making decisions on emission trading. Therefore an in-depth knowledge onmarket potential of GHG is important. The objective of this paper is to review the flexible mechanisms under the Kyoto Protocoli.e. 11, CDM and emission trading along with principles. modalities and procedures inrelation to Sri Lankan environmental conditions and to estimate the total GHG marketpotential for Sri Lanka if the country decides to participate in the global GHG market. Thispaper presents an economic analysis of GHG market in Sri Lanka with an attempt toinvestigate the relationship between rate of emission and economic growth. This ventureessentially creates an equity problem which is discussed using different discount rates. Data from secondary sources. in particular GHG inventories for Sri Lanka for J 1)94 & 11)1)5years arc used to estimate Sri Lankan emission trading potential. These figures will heuseful for predicting Sri Lankan contribution to the emission trading market. Sinks andSources and the sectors of emission are discussed separately in order to identify the mostimportant sectors in terms of emission trading. The paper also discusses the disadvantagesof emission trading, particularly whether this would limit our development potential andsovereignty. the major criticisms against the emission trading. Finally, this paper presentsthe relationship between GHG emission. emission trading potential and economicdevelopment under various scenarios.

Environmental problems that are a consequence of intensive development, competitive market, increased living standards, and energy costs have been brought into the focus of energy policy both in the European Union and in Croatia. This is especially pronounced in the Kyoto Protocol and in the energy sector liberalization processes. In this paper we discuss the possible domestic policies for the implementation of the Kyoto Protocol and their compliance with the energy market liberalisation as well as with global trading rules. Croatia as Annex I party has still not ratified the Kyoto Protocol because of the specific Croatian circumstances with respect to determination of the baseline emissions of greenhouse gases. This paper also explores the impacts of emerging environmental markets such as EU emissions trading scheme on energy sector in Croatia in line with Kyoto Protocol requirements. Directive 2003/87/EC establishing a scheme for greenhouse gases emissions allowances trading within the European Union has launched the biggest emissions trading scheme in the world. The goal is to give efficient economical measure for reducing greenhouse gases emissions in achieving Kyoto targets. Deficit with regard to allowances will be punished, and surplus can be sold or kept for further usage. Buying or selling emission allowances will have great impact on competitiveness of production facilities. With introduction of the Linking Directive 2004/101/EC with regards to Kyoto Protocol project mechanisms (Joint Implementation, Clean Development Mechanism) for emission trading EU ETS, energy utilities have a possibility to increase their emission allowances and plant production. In the paper we are considering requirements for the implementation of Kyoto Protocol, advantages and disadvantages, development of emissions trading in Europe, the influence of the same to Croatia, analysing impact of emissions trading on energy sector and business behaviour.

Canada and the European Union are among the io largest emitters of greenhouse gas emissions, accounting for two and 14 percent respectively of global carbon dioxide emissions. Both have large environmental communities and strong environmental regulatory capacities, and both are parties to most major multilateral environmental agreements. The European Union pushed strongly for the ratification of the Kyoto protocol after the United States pulled out of the agreement in 2001, threatening the future of the regime. Canada, which had been one of the first countries to sign the Kyoto protocol, joined the EU in ratifying it in 2002.Despite these similarities, Canada and the EU in recent years have had very different experiences with climate policy implementation and have taken substantially different positions towards the establishment of postKyoto climate reduction goals. Canada committed to reducing its greenhouse gas emissions by six percent of 1990 levels by 2012. The EU-15 (that is, the 15 members of the European Community at the time the Kyoto protocol was formulated) committed to an eight-percent reduction over the same time frame.The EU-15 are well on track to meeting their Kyoto protocol target and could even surpass it. At the end of 2008, greenhouse gas emissions in the EU-15 were 6.9 percent below 1990 base year emissions. The remaining cuts that need to be made can be achieved through a combination of planned domestic mitigation measures and reliance on the Kyoto flexibility mechanisms (emissions trading, joint implementation, and the clean development mechanism).Future EU emission targets are based on the EU-27 membership. In late 2007, the EU set a target to reduce EU-27 greenhouse gas emissions by 20 percent of 1990 levels by 2020, independent of other country actions in the international climate negotiations. The EU has stated it will move to a 30-percent reduction target if other countries take comparable action. The EU-27 are also making progress on their 20-percent reduction goal. Emissions in 2008 were 11.3 percent below 1990 levels.1In contrast, Canada is far from meeting its Kyoto emissions reduction target and has set a weak goal for 2020. Canadian emissions were 24.1 percent higher at the end of 2008 than in 1990, or 31.5 percent above the Canadian Kyoto target. To put this into perspective, US emissions were 14 percent higher in 2008 than in 1990.2 Canadian emissions have been growing faster than those of any other G8 country. At the Copenhagen climate conference in December 2009, Canada set a new climate target: a 17-percent reduction in greenhouse gas emissions by 2020, relative to 2005 emission levels.3 The World Resources Institute calculated that this is equivalent to a three-percent increase in emissions over 1990 levels, or a 19-percent increase when land use, land use change, and forestry measures are included in the calculation.4The Conservative minority government that has been in power since 2006 has questioned the Kyoto protocol's fairness, Canada's ability to meet its target, and the economic impact that mitigation efforts required by Kyoto would have on the economy.5 In November 2009, in the run-up to the Copenhagen climate convention, the Canadian senate defeated a bill introduced by the opposition that called for cuts in greenhouse gas emissions by 25 percent of 1990 levels.6What explains the differences in Canadian and European approaches to climate change and are the differences really as large as these figures suggest? Clearly, at the aggregate level, the EU has outperformed Canada. Yet when the performance of Canadian provinces and EU member-states is considered, the picture is more nuanced. Both within Canada and the EU there are substantial differences among provinces/member-states in their greenhouse gas performance and support for strong climate policies. This article compares the opportunities and constraints that federalism places on Canada and the EU in terms of their climate policymaking. …

Clean Development Mechanism (CDM) is an agreement under the Kyoto Protocol (1997) allowing industrialized (Annex-I) countries with Greenhouse Gas emission reduction commitment to invest in or finance projects that reduce emissions in developing countries using clean technologies. Under CDM, for every tonne of CO2 that does not enter into the atmosphere, a developing (Non-Annex-I) country earns one carbon credit which can be further sold to developed countries (Annex-I) through the international carbon market. Developed countries exchange these credits in terms of money and technology transfer with developing countries to meet their GHG emission reduction targets. 7391 CDM projects were registered worldwide by November 2013, out of which 6205 (84%) are under energy industry sector. India is contributing 828 (13%) CDM projects with estimated emission reduction of 69,156,926 metric tonnes of CO2e. By the end of the first commitment period (2012), 19,061,210 metric tonnes of CO2e emission reduction was achieved. The estimated range of annual CDM-generated revenue in India varies between US$10 and 330 million (Birla et.al.2012). India has the second largest number of CDM projects in the world. The National Clean Development Mechanism Authority (NCDMA) is the Designated National Authority (DNA) which was set up to evaluate and approve CDM projects. This paper provides a probing insight into these projects, and the methodologies used in order to achieve emission reduction by Indian industries.

Under the 1997 Kyoto Protocol, economies in transition are eligible for both emissions trading (Article 17) and joint implementation (Article 6). Guiding rules for implementing these mechanisms were decided through the Marrakech Accords in November 2001. These countries may benefit substantially from those mechanisms if they are implemented appropriately. However, with the departure of the USA from the Kyoto Protocol, the likely revenues from international emissions trading for the economies in transition are likely to be limited at least during the first commitment period. A key criterion on whether countries should undertake emissions trading is the comparison of projections of emissions until 2012 with the target under the Kyoto Protocol. For joint implementation, the investment climate and the emission reductions potential of a specific project are more important. Countries that are bound by the Kyoto Protocol need to implement a clear institutional structure, which includes a JI office or a position solely in charge of JI. Even if a country decides not to engage in JI, such an office could help guide possible foreign investors.

Under the 1997 Kyoto Protocol, economies in transition are eligible for both emissions trading (Article 17) and joint implementation (Article 6). Guiding rules for implementing these mechanisms were decided through the Marrakech Accords in November 2001. These countries may benefit substantially from those mechanisms if they are implemented appropriately. However, with the departure of the USA from the Kyoto Protocol, the likely revenues from international emissions trading for the economies in transition are likely to be limited at least during the first commitment period. A key criterion on whether countries should undertake emissions trading is the comparison of projections of emissions until 2012 with the target under the Kyoto Protocol. For joint implementation, the investment climate and the emission reductions potential of a specific project are more important. Countries that are bound by the Kyoto Protocol need to implement a clear institutional structure, which includes a JI office or a position solely in charge of JI. Even if a country decides not to engage in JI, such an office could help guide possible foreign investors.

After long international negotiations, the Kyoto Protocol of 1997 — if it enters into force — sets legally binding emissions targets for a basket of six greenhouse gases. These targets apply to most OECD countries and countries with economies in transition. A novel feature is the use of a commitment period that runs from 2008 to 2012 instead of a single target year. Moreover, the Protocol allows for the use of so-called flexible mechanisms: emissions trading (Art. 17), Joint Implementation (JI) (Art. 6) and projects of the ‘Clean Development Mechanism’ (CDM) with countries without emissions targets (Art. 12). All these instruments must be ‘supplemental’ to domestic measures.1 Supplementarity has not been defined in the Protocol, however. If average emissions in the commitment period are lower than the emissions target, the difference can be banked for the next commitment period. In the case of higher emissions the country will be in non-compliance.

Executive Summary: The California Climate Action Registry, which was initially established in 2000 and began operation in Fall 2002, is a voluntary registry for recording annual greenhouse gas (GHG) emissions. The purpose of the Registry is to assist California businesses and organizations in their efforts to inventory and document emissions in order to establish a baseline and to document early actions to increase energy efficiency and decrease GHG emissions. The State of California has committed to use its ''best efforts'' to ensure that entities that establish GHG emissions baselines and register their emissions will receive ''appropriate consideration under any future international, federal, or state regulatory scheme relating to greenhouse gas emissions.'' Reporting of GHG emissions involves documentation of both ''direct'' emissions from sources that are under the entity's control and indirect emissions controlled by others. Electricity generated by an off-site power source is consider ed to be an indirect GHG emission and is required to be included in the entity's report. Registry participants include businesses, non-profit organizations, municipalities, state agencies, and other entities. Participants are required to register the GHG emissions of all operations in California, and are encouraged to report nationwide. For the first three years of participation, the Registry only requires the reporting of carbon dioxide (CO2) emissions, although participants are encouraged to report the remaining five Kyoto Protocol GHGs (CH4, N2O, HFCs, PFCs, and SF6). After three years, reporting of all six Kyoto GHG emissions is required. The enabling legislation for the Registry (SB 527) requires total GHG emissions to be registered and requires reporting of ''industry-specific metrics'' once such metrics have been adopted by the Registry. The Ernest Orlando Lawrence Berkeley National Laboratory (Berkeley Lab) was asked to provide technical assistance to the California Energy Commission (Energy Commission) related to the Registry in three areas: (1) assessing the availability and usefulness of industry-specific metrics, (2) evaluating various methods for establishing baselines for calculating GHG emissions reductions related to specific actions taken by Registry participants, and (3) establishing methods for calculating electricity CO2 emission factors. The third area of research was completed in 2002 and is documented in Estimating Carbon Dioxide Emissions Factors for the California Electric Power Sector (Marnay et al., 2002). This report documents our findings related to the first areas of research. For the first area of research, the overall objective was to evaluate the metrics, such as emissions per economic unit or emissions per unit of production that can be used to report GHG emissions trends for potential Registry participants. This research began with an effort to identify methodologies, benchmarking programs, inventories, protocols, and registries that u se industry-specific metrics to track trends in energy use or GHG emissions in order to determine what types of metrics have already been developed. The next step in developing industry-specific metrics was to assess the availability of data needed to determine metric development priorities. Berkeley Lab also determined the relative importance of different potential Registry participant categories in order to asses s the availability of sectoral or industry-specific metrics and then identified industry-specific metrics in use around the world. While a plethora of metrics was identified, no one metric that adequately tracks trends in GHG emissions while maintaining confidentiality of data was identified. As a result of this review, Berkeley Lab recommends the development of a GHG intensity index as a new metric for reporting and tracking GHG emissions trends.Such an index could provide an industry-specific metric for reporting and tracking GHG emissions trends to accurately reflect year to year changes while protecting proprietary data. This GHG intensity index changes while protecting proprietary data. This GHG intensity index would provide Registry participants with a means for demonstrating improvements in their energy and GHG emissions per unit of production without divulging specific values. For the second research area, Berkeley Lab evaluated various methods used to calculate baselines for documentation of energy consumption or GHG emissions reductions, noting those that use industry-specific metrics. Accounting for actions to reduce GHGs can be done on a project-by-project basis or on an entity basis. Establishing project-related baselines for mitigation efforts has been widely discussed in the context of two of the so-called ''flexible mechanisms'' of the Kyoto Protocol to the United Nations Framework Convention on Climate Change (Kyoto Protocol) Joint Implementation (JI) and the Clean Development Mechanism (CDM).

The controversy over the issues of carbon sinks and emissions trading nearly aborted the Kyoto Protocol. The lengthy and intense debate over the roles that each are to play under the Protocol and the consequent political compromises has resulted in a complex set of provisions and an arcane nomenclature. The distinction drawn between the use of carbon sinks in developed countries under Joint Implementation and their use in developing countries under the Clean Development Mechanism (CDM) is a particular source of intricacy. It is at least arguable that key elements of the compromises reached at COP-6 and COP-7 in this regard are inconsistent with the terms of the Protocol and are ultra vires the Convention on Climate Change. This is a source of both uncertainty and potential legal challenge. Not only do the recent decisions create needless complexity, they also clearly discriminate against developing nations. Among the recent political compromises is the creation of a third type of non-bankable but tradeable unit with respect to forest management, which is only available to Annex I countries. The result is an anomalous one in which a variety of otherwise equivalent carbon credits can be generated under three different regimes including one, the CDM, that is subject to an elaborate regulatory overlay that discriminates against carbon sequestration by developing countries. For example, complying developed countries can essentially self-certify sequestration projects. In contrast, projects in developing countries must obtain prior approval from a subsidiary body, the CDM Executive Board, mandated to require detailed information and impose substantive and procedural hurdles not required or imposed by its companion body, the Article 6 Supervisory Committee on Joint Implementation Projects. The parallel and related debate over the third 'flexibility' mechanism, emissions trading, compounded the complexity of an already asymmetric and bifurcated system. The new requirements devoted to 'environmental integrity' not only have raised the costs of compliance of developing country projects but also virtually ignore the fundamental principle of sustainable economic growth and development embodied in the Convention and related international agreements. The regulations for carbon sinks now being formulated at Conferences of the Parties will have a significant impact on their use worldwide. Of key importance, in addition to their successful integration of carbon sinks and emissions trading into other international treaties, is the development of practically achievable and objective standards and an efficient and transparent approval process consistent with the terms of the Convention and the Protocol. Most important of all is a rebalancing that restores the primacy of addressing climate change in the context of sustainable economic growth and development.

This paper aimed to study clean development mechanism (CDM) projects in Iran. Greenhouse gas mitigation strategies are generally considered costly with world leaders often engaging in debate concerning the costs of mitigation and the distribution of these costs between different countries. CDM projects are useful tools to reduce these costs. Kyoto Protocol includes three mechanisms, namely: emission trading, joint implementation and CDM. CDM is the only mechanism of the Kyoto Protocol and United Nations Framework Convention on Climate Change (UNFCCC) in which developing countries can participate. Comprehensive interviews with experts from Iranian oil and energy ministries and Department of Environment (DOE) resulted in detecting the missed opportunities for CDM in Iran. Lack of long term planning for the Kyoto Protocol, limitation of technology and finance, lack of regulation and functionality of a financial system and international sanctions are the most significant obstacles for implementation of CDM projects in Iran. At the end, a comprehensive analysis for utilising CDM to greenhouse gas reduction and climate change mitigation is presented.

AFTER MANY years of uncertainty, the Kyoto Protocol finally entered into force on 16 February 2005.1 In one sense, this day marked the culmination of a long process in the international community's efforts to combat climate change.2 In another sense, the entry into force of the Kyoto Protocol represents the beginning of a new era, for much work remains to be done by the international community to ensure that the commitments entered into under the Kyoto Protocol are implemented. The Kyoto Protocol aims to combat the problems connected with climate change by introducing quantified limitations on emissions of greenhouse gases – which are defined as including carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulphur hexafluoride – for the states parties listed in Annex I of the Framework Convention on Climate Change.3 These states, which comprise developed countries and countries with emerging market economies, have an obligation under Article 3 of the Kyoto Protocol to limit their greenhouse gas emissions to the levels stipulated in Annex B.4 Crucially, Article 3 further provides that the states parties can meet their quantitative emission limitations either ‘individually or jointly’.5 The Kyoto Protocol elaborates three methods by which states parties can comply with their emission limitations ‘jointly’. These are collectively known as the ‘Kyoto flexibility mechanisms’, and they consist of ‘joint implementation’, the ‘clean development mechanism’, and ‘emissions trading’. Contemporaneously with the entry into force of the Kyoto Protocol, efforts are being made to implement the rights and obligations contained in the Protocol into domestic legislation.6 Accordingly, the quantified emission limitation and reduction obligations are being passed on to private entities operating within each state party. These private entities are also permitted to take advantage of the flexibility mechanisms in order to facilitate their compliance with relevant domestic …