MECHANISMS UNDER THE KYOTO PROTOCOL

Flexible mechanisms defined by the Kyoto Protocol help to minimize the overall costs of committed greenhouse gas emission reduction. These mechanisms enable Parties to access cost-effective opportunities to reduce emissions or to remove carbon from the atmosphere in other countries. Greenhouse gases emissions are global problem, therefore effect of mitigation of emissions is the same wherever it takes place. There are three flexible mechanisms established under the Kyoto Protocol: Joint Implementation (JI), Clean Development Mechanism (CDM) and International Emission Trading (IET).

The fields of JI/CDM projects


Joint Implementation (JI)

“Party included in Annex I may transfer to, or acquire from, any other such Party emission reduction units resulting from projects aimed at reducing anthropogenic emissions by sources or enhancing anthropogenic removals by sinks of greenhouse gases.” (Article 6 of the Kyoto Protocol.) The reduced emissions are calculated as difference between two scenarios – project scenario (new project is realized) and baseline scenario (if the project would not be realized). Credit corresponding to one ton of CO2e reduced by JI project is called ERU – Emission Reduction Unit. ERUs may be issued only in relation to first Kyoto period (2008 - 2012).

JI project cycle


Joint Implementation is the relevant mechanism in the countries of Central and Eastern Europe, including the Czech Republic. JI allows to co-finance the project by selling ERUs provided that reduction in emissions caused by the project would not otherwise occur. Our company, BTG Central Europe, has professional experience in JI projects development. Are you realizing JI project and wish to sell ERUs? Are you not sure if your project is suitable for Joint Implementation? Contact us for emission trading advisory services or other services in this area.

Clean Development Mechanism (CDM)

Clean Development Mechanism, as it is set out in Article 12 of the Kyoto Protocol, provides for Annex I Parties to implement project activities that reduce emissions in developing countries (non-Annex I countries, e.g. Brazil). Credits generated by CDM projects are called CER – Certified Emission Reduction.

International Emission Trading (IET)

Emission Trading, which is defined by Article 17 of the Kyoto Protocol, is relevant for Annex I countries. Countries that have ratified the Kyoto Protocol receive a specific number of AAUs (Assigned Amount Units) that is equivalent to the volume of greenhouse gases they can release and still remain in compliance with its emission reduction target under the Kyoto Protocol. Entities that are able to stay below their designated limits may sell their surplus of AAUs. As was already mentioned above, the credits assigned to Parties in context of IET are called AAU – Assigned Amount Unit.

Green Investment Scheme (GIS)

Green Investment Scheme has been proposed as a means of greening International Emission Trading. Some countries especially from Central and Eastern Europe (including the Czech Republic) recently emit significantly less than in reference year 1990 because of economic decline. This provides them with surplus number of AAUs that have not been generated through purposely greenhouse gas reducing activities (so-called Hot Air). Green Investment Scheme was designed to minimize the effect of Hot Air. Under GIS the finances earned by countries through the sale of Hot Air will be spent on projects that provide environmental benefits (e.g. additional emission reduction, education support and social program in that area, etc.)