The Kyoto Protocol Fact Sheet released by the Bureau of Oceans and International Environmental and Scientific Affairs U.S. Department of State, November 2, 1998 Background At a conference held December 1-11, 1997, in Kyoto, Japan, the Parties to the UN Framework Convention on Climate Change agreed to an historic Protocol to reduce greenhouse gas emissions by harnessing the forces of the global marketplace to protect the environment. Key aspects of the Kyoto Protocol include emissions targets, timetables for industrialized nations, and market-based measures for meeting those targets. The Protocol makes a down payment on the meaningful participation of developing countries, but more needs to be done in this area. Securing meaningful developing country participation remains a core U.S. goal. Emissions Targets A central feature of the Kyoto Protocol is a set of binding emissions targets for developed nations. The specific limits vary from country to country, though those for the key industrial powers of the European Union, Japan, and the United States are similar 8 percent below 1990 emissions levels for the European Union, 7 percent for the United States, and 6 percent for Japan. The framework for these emissions targets includes the following provisions: Emissions targets are to be reached over a five-year budget period rather than by a single year. Allowing emissions to be averaged across a budget period increases flexibility by helping to smooth out short-term fluctuations in economic performance or weather, either of which could spike emissions in a particular year. The first budget period will be 2008-2012. The parties rejected budget periods beginning as early as 2003, as neither realistic nor achievable. Having a full decade before the start of the binding period will allow more time for companies to make the transition to greater energy efficiency and/or lower carbon technologies. The emissions targets include all six major greenhouse gases: carbon dioxide, methane, and nitrous oxide, as well as three synthetic substitutes for ozone-depleting CFCs that are highly potent and long-lasting in the atmosphere. Activities that absorb carbon, such as planting trees, will be used as offsets against emissions targets. "Sinks" were also included in the interest of encouraging activities like afforestation and Accounting for the role of forests is critical to a comprehensive and environmentally responsible approach to climate change. It also provides the private sector with low-cost opportunities to reduce emissions. International Emissions Trading The Kyoto Protocol allows nations with emissions targets to trade greenhouse gas allowances. Using this mechanism, countries can achieve reductions at the lowest cost. Emissions trading was developed in the United States to reduce sulfur dioxide that causes acid rain and has been successful beyond expectations. Under an emissions trading regime, countries or companies can purchase less expensive emissions permits from countries that have more permits than they need (because they have met their targets with room to spare). Structured effectively, emissions trading can provide a powerful economic incentive to cut emissions while also allowing important flexibility for taking cost-effective actions. The Kyoto Protocol established emissions trading. Rules and guidelines in particular for verification, reporting, and accountability — will be developed. The inclusion of emissions trading in the Kyoto Protocol reflects an important decision to address climate change through the flexibility of market mechanisms. The Conference rejected proposals to require all Parties with targets to impose specific mandatory measures, such as energy taxes. A number of countries, including Australia, Canada, Japan, New Zealand, Russia, Ukraine, and the United States, reached a conceptual agreement to pursue, through an umbrella group, the implementation of a trading regime. Such a group could further contribute to cost-effective solutions to this problem. Joint Implementation Among Developed Countries Countries with emissions targets may obtain credit toward their targets through project-based emission reductions in other such countries. The private sector may participate in these activities. Additional details may be agreed upon by the Parties at future meetings. Clean Development Mechanism Another important market-based component of the Kyoto Protocol is the so-called Clean Development Mechanism (CDM). The CDM embraces the concept of joint implementation for credit in developing countries. With the Clean Development Mechanism, developed countries will be able to use certified emissions reductions from project activities in developing countries to contribute to their This Clean Development Mechanism will allow companies in the developed world to enter into cooperative projects to reduce emissions in the developing world — such as the construction of high-tech, environmentally sound power plants — for the benefit of both parties. The companies will be able to reduce emissions at lower costs than they could at home, while developing countries will be able to receive the kind of technology that can allow them to grow more sustainably. The CDM will certify and score projects. The CDM can also allow developing countries to bring projects forward in circumstances where there is no immediate developed country partner. Under the Clean Development Mechanism, companies can choose to make investments in projects or to buy emissions reductions. In addition, Parties will ensure that a small portion of proceeds are used to help particularly vulnerable developing countries, such as island states, adapt to the environmental consequences of climate change. Importantly, certified emissions reductions achieved starting in the year 2000 can count toward compliance with the first budget period. This means that private companies in the developed world will be able to benefit from taking early action. Developing Countries Various Protocol provisions, taken together, represent a down payment on developing country participation in efforts to reduce greenhouse gas emissions. Developing countries will be engaged through the Clean Development Mechanism, noted above. The Protocol advances the implementation by all Parties of their commitments under the 1992 Framework Convention on Climate Change. For example, the Protocol identifies various sectors (including the energy, transport, and industry sectors as well as agriculture, forestry, and waste management) in which national programs should be developed to combat climate change. The Protocol also provides for more specific reporting on actions taken. Securing meaningful participation from key developing countries remains a priority for the United States. The Administration has stated that without such participation, it will not submit the Kyoto Protocol to the Senate for advice and consent to ratification. Compliance and Enforcement The Protocol contains several provisions intended to promote compliance. These include requirements related to measurement of greenhouse gases, reporting, and review of implementation. The Protocol also contains certain consequences for failure to meet obligations. For example, a Party not in compliance with its measurement and reporting requirements cannot receive credit for Effective procedures and a mechanism to determine and address noncompliance are to be decided at a later meeting. For both environmental and competitiveness reasons, the United States will be working on proposals to strengthen the compliance and enforcement regime under the Protocol. Entry Into Force The Kyoto Protocol opened for signature in March 1998. To enter into force, it must be ratified by at least 55 countries, accounting for at least 55 percent of the total 1990 carbon dioxide emissions of developed countries. U.S. ratification will require the advice and consent of the Senate. International Emissions Trading Fact Sheet released by the Bureau of Oceans and International Environmental U.S. Department of State, November 2, 1998 The Kyoto Protocol combines ambitious environmental targets with innovative market-based mechanisms to help Parties achieve those targets at the lowest possible cost. Recognizing that the cost of reducing greenhouse gas emissions is many times greater in some countries than in others, the Protocol allows each country with a binding target (an Annex B country) to use “emissions trading" and other flexibility mechanisms to meet their commitments. How Emissions Trading Would Work In an emissions trading system, Annex B countries and their authorized private entities will be able to purchase emissions allowances from each other. Each Annex B country's binding target determines how many allowances it has. Countries may buy or sell these emissions allowances at the government-to-government level. Countries may also authorize their legal entities (companies, individuals, NGOs, etc.) to buy and sell emissions allowances. If the cost of controlling emissions is different in two countries, both will benefit if the one facing lower costs sells some of its emissions allowances to the other. The environmental impact of reducing greenhouse gases will be the same no matter where the reductions take place. Thus, emissions trading will allow the overall reduction required by the Kyoto targets to be achieved at a lower total cost, with both buyers and sellers gaining from the savings allowed by trading. U.S. Experience with Emissions Trading U.S. experience with domestic emissions trading has been highly successful. The acid rain provisions of the federal Clean Air Act allow electric power plants to trade sulfur dioxide allowances, resulting in an active private market. Emissions are being cut significantly ahead of schedule--over the last three years, emissions have been reduced over 30% more than required— and the cost of emissions reductions has been less than 50% of what was expected. Benefits of Trading In order to provide real environmental benefits, a trading system must have mechanisms for verification, reporting, and accountability that meet high standards. At the same, the system must be designed to be as efficient as possible to result in cost-effective reductions. Greenhouse gas emissions trading will bring many benefits. It would: Promote ratification of and global compliance with the Protocol by making reductions less costly. Trading will also provide incentives to reduce emissions below target levels; |