The Kyoto Protocol is an international agreement linked to the United Nations Framework Convention on Climate Change that aims at reduction of Green House Gases (GHGs) and others like CFCs. The Kyoto Protocol was adopted in Kyoto, Japan, on 11 December 1997 and entered into force on 16 February 2005. Currently, there are 192 Parties (191 States and 1 regional economic integration organization) to the Kyoto Protocol to the UNFCCC.
Participation in the Kyoto Protocol, where dark green indicates countries that have signed and ratified the treaty and yellow indicates states that have signed and hope to ratify the treaty. Notably, Australia and the United States have signed but, currently, decline to ratify it. Participating countries that have ratified the Kyoto Protocol have committed to cut emissions of not only carbon dioxide, but of also other greenhouse gases, like, Methane (CH4), Nitrous oxide (N2O), Hydrofluorocarbons (HFCs), Perfluorocarbons (PFCs), and Sulphur hexafluoride (SF6). The goals of Kyoto were to see participants collectively reducing emissions of greenhouse gases by 5.2% below the emission levels of 1990.
This goal is to be achieved by the year 2012. While the 5.2% figure is a collective one, individual countries were assigned higher or lower targets and some countries were permitted increases. Recognizing that developed countries are principally responsible for the current high levels of GHG emissions in the atmosphere as a result of more than 150 years of industrial activity, the Protocol places a heavier burden on developed nations. Under the Protocol, 37 industrialized countries and the European Union (called “Annex I countries”) commit themselves to a reduction of four greenhouse gases (GHG) and two groups of gases (hydrofluorocarbons and perfluorocarbons) produced by them and all other member countries give general commitments. The total percentage of Annex I Parties emissions is 63.7%. Any Annex 1 country that fails to meet its Kyoto Protocol target will be penalized by having its reduction targets decreased by 30% in the next period India and China, which have ratified the Kyoto protocol, are not obligated to reduce greenhouse gas production at the moment as they are developing countries;
i.e. they weren’t seen as the main culprits for emissions during the period of industrialization thought to be the cause for the global warming of today. This is a little odd given that China is about to overtake the USA in emissions, but take into account the major differences in population and that much of the production in these countries is fuelled by demand from the West and influence from the West on their own culture. As a result of this loophole, the West has effectively outsourced much of its carbon emissions to China and India.
The Protocol allows Annex I countries to meet their GHG emission limitations by several “flexible mechanisms”, such as emissions trading (interms of carbon credits/Kyoto credits), the clean development mechanism (CDM) and joint implementation which are described below: • If participant countries continue with emissions above the targets, then they are required to engage in emissions trading. Emission trading allows the countries to purchase GHG emission reductions credits from other countries that do not need to reduce their GHG emissions. • The Clean Development Mechanism (CDM) allows developed countries to undertake projects to reduce emissions in developing countries to generate Kyoto units. • Joint Implementation (JI) allows developed countries to undertake projects to reduce emissions in other developed countries to generate Kyoto units.
• Carbon Credits – Indian Scenario
• Carbon credits and carbon markets are a component of national and international attempts to mitigate the growth in concentrations of greenhouse gases (GHGs). One carbon credit is equal to reduction of one ton of carbon dioxide, or in some markets, carbon dioxide equivalent gases. The goal is to allow market mechanisms to drive industrial and commercial processes in the direction of low emissions of GHGs into the atmosphere.
• During Kyoto protocol, allocation of carbon credits or Kyoto credits was made to different countries. Each credit gives the owner the right to emit one metric ton of carbon dioxide or other equivalent greenhouse gas. If a country exceeds its emission quota, it has to pay for it in three possible mechanisms to get back the credits, and thus GHG emissions become expensive for the emitters. The three mechanisms are as follows: • Mechanims I – Emission Trading: Countries that have not used up their quotas can sell their unused allowances as carbon credits, while others that are about to exceed their quotas can buy them.
• Mechanism II – Clean Development Mechanism: Developed countries (responsible for high GHG emissions, listed as Annex I countries) can start GHG reduction projects in relatively un-developed country (listed as non-annex countries). The purpose of this mechanism is to encourage clean development in developing countries. CDM rights are given only to Annex I countries. • Mechanism III – Joint Implementation Mechanism: A developed country with relatively high cost of setting up of GHG reduction project, will set it in some other developed country. This way, countries can reduce their GHG reduction costs at the same time contribute to Global GHG reduction. An example for a JI project is replacing coal thermal project with a more efficient combined heat and power project. At present Russia and Ukraine are having highest number of JI projects. •
• Carbon credits can be gained even by individuals within a country by developing projects that reduce GHG emissions. Several private and government organizations are existing now for sale and purchase of carbon credits.
• The actual value of each credit may vary, subject to the market position. Currently its value is about 12-20 Euros. • Indian Scenario: • India has generated approximately 30 Million carbon credits and approximately 140 million in run, the second highest transacted volumes in the world. India’s carbon market is growing faster than even information technology, bio technology and BPO sectors as 850 projects with a huge investment of Rs 650,000 million are in pipeline. As per the Prime Minister’s Council on Climate Change, the revenue from 200 projects is estimated at Rs. 97 billion till 2012. • India has been able to register approximately 350 projects spread across various sectors with major dominance of renewable energy, energy efficiency and biomass energy projects. • Renewable energy status in India
• Carbon, like any other commodity, has begun to be traded on India’s Multi Commodity Exchange and has become first exchange in Asia to trade carbon credits. •