October 5, 2012

Part 4: Under the Hood of the Kyoto Protocol

Kyoto Protocol: Under the Hood

In the previous article we saw that there was plenty of politics with regards to the Kyoto Protocol. But then, you may be wondering what actually constitutes this Protocol? Well, this article will give you a peek under the hood of the Kyoto Protocol.

To be honest, this may be a 10,000 foot fall (without a parachute) to newbies, but I will try as much as possible to introduce things in a subtle manner; worry not! But then, you will have to undertake further reading so as to have a firm grasp of the issues under discussion.

In a nutshell

In a nutshell, the functional components of the Kyoto Protocol are known as the Kyoto Protocol Mechanisms. These are the functional components that actually make up the Kyoto Protocol, and they are:

·      Emissions Trading
·      Clean Development Mechanism (CDM)
·      Joint Implementation (JI)

Let us first itemize the objectives of these mechanisms before delving into their details:

 ·      To stimulate sustainable development through technology transfer and investment

·      To assist countries to reach their Kyoto commitments in a manner that is cost-effective

·     To encourage both the private sector and developing countries to contribute to emission reduction efforts

a.    Emissions Trading

This is the first mechanism we are going to look at, and as the name suggests, it is a platform that facilitates the trading of carbon units. Annex B countries that have commitments under the Kyoto Protocol mainly practice it. These countries usually have emission reduction targets either for limiting or reducing emissions. These targets are expressed as “assigned amount units” (AAUs).

How it works

Actually, you may have guessed it right; this mechanism is actually a market, so there is “buying” and “selling” of commodities (carbon units). This market is commonly known as the “carbon market”, as carbon dioxide is the principle Green House Gas (GHG).

Under this mechanism, a country has a “ceiling” of the amount of GHGs they can release to the atmosphere. Therefore, there are countries that usually surpass this ceiling, while others are more efficient and keep their emissions under their ceiling (target). What actually happens to countries that have surpassed their ceiling?  In this mechanism, such countries will usually go to countries that have not surpassed their emissions target and buy their “spare” units. Now, this is what is called emissions trading.

Other trading units used

There are other trading units, apart from AAUs, which are used in the carbon market. They are:

Þ   Removal Unit (RMU): This is usually based on land use, land-use change and forestry(LULUCF) activities (e.g reforestation)

Þ   Emissions Reduction Unit (ERU): It is generated by a Joint Implementation project (we will discuss it in a short while)

Þ   Certified Emissions Reduction (CER): This is usually generated by a CDM project (will also be discussed in a short while)

Each of these units is equal to one tonne of CO2.

Tracking, Checks and Balances

As with other systems, this mechanism must be tracked and appropriate checks and balances applied:

·      The registry systems under the Kyoto Protocol are used to track the transfer and acquisition of these emission reduction units

·      The International Transfer Log ensures that the transfer of emission reduction units between countries is secure

·      In order to avoid ‘overselling of units’, each country is required to maintain a reserve of its emission reduction units (also known as “commitment period reserve”), and it should not fall below 90% of the party’s assigned amount

Success Story

Well, this mechanism seems quite impressive, and there has been one stellar success story: the European Union Trading Scheme (EUTS). It is actually the largest scheme in operation.

b. Clean Development Mechanism (CDM)

You most definitely have heard of this mechanism, and it is quite interesting. It is defined in Article 12 of the Kyoto Protocol. Simply put, it allows Annex B party countries to implement emission-reduction projects in developing countries; its that simple! Therefore, it is a standardized emissions offset instrument.


This mechanism began operation in 2006, and so far, more than 1,650 projects have been registered under this mechanism. This is expected to result in the reduction of 2.9 billion tonnes of CO2 in the first commitment period (2008-2012).

Management of CDM

The CDM Executive Board oversees the CDM, and it is ultimately answerable to the countries that have ratified the Kyoto Protocol.

A simple example

KenGen (Kenya Electricity Generating Company) has six projects that are under CDM, mainly dealing with geothermal energy. Some of them are:  Eburru Geothermal Project and Olkaria II Geothermal Expansion Project.

c. Joint Implementation (JI)

This mechanism is defined in Article 6 of the Kyoto Protocol, and it allows an Annex B country to earn Emission Reduction Units (ERU) from an emission reduction or emission removal project in another Annex B country.

The country that is hosting the project usually stands to benefit from foreign investment and technology transfer.

Example project

For example, a developed country may implement a renewable energy project (e.g geothermal power plant) in an EIT (Economy In Transition) country such as Ukraine to replace a coal-fired power plant.

Operation of JI

There are two tracks of operation for JI projects:

·      Track 1 Procedure

This is when a host party meets all the eligibility requirements to transfer and/or acquire Emission Reduction Units (ERU), and it may issue the appropriate ERUs to the partnering country

·      Track 2 Procedure

This is when a host party only fulfils part of the eligibility requirements; this then means that the verification process and awarding of ERUs has to be overseen by the Joint Implementation Supervisory Committee (JISC). The JISC can then accredit an independent entity to determine whether relevant requirements have been met.

However, it is important to note that a party that fulfils Track 1 requirements can opt for Track 2 procedure.


JI projects have certain guidelines that have to be followed, and they are:

·      A JI project must provide a reduction in emissions by sources, or an enhancement of removals by sinks

·      The host party must approve the JI project

·      Participants have to be authorized to participate by a party involved in the project

·      Projects that started as far back as the year 2000 may be eligible as JI projects if they meet certain requirements

·      ERUs may only be issued by for a crediting period starting after the beginning of 2008.

Eligibility requirements for Kyoto Protocol Mechanisms

In order for Annex 1 parties to be eligible to take part in these mechanisms, they have to meet certain requirements (among others):

·      They must have ratified the Kyoto Protocol

·      They must have calculated their assigned amount in terms of tonnes of CO2-equivalent

·      They must have a national system for estimating emissions and the removal of greenhouse gases in their territories

·       They must have in place a national registry that records and tracks the movement of ERUs, CERs, AAUs and RMUs, which they have to report annually to the secretariat


As I had warned you at the beginning of this piece, it is quite heady stuff, but please take time and read more about these mechanisms.

This piece marks the end of the background information on the UNFCCC process and structure. The next batch of articles will cover the politics surrounding this process, and this is where gloves usually come off during the UNFCCC talks. See you then!

PS: As usual, if you are interested in contributing to this COP series, please send an email to mbevakl@gmail.com and I will be glad to have you on board!

Useful links used in this research:



  1. Very insightful indeed!

    Thank you Liti for the initiative! I won't send you an email but will add my two cents here in the comments section so that we can do what bloggers love to do... blog!

    The first commitment period of the Kyoto protocol is coming to an end this year and analysts are warning that there remains less of a chance for the globally established and re-known polluting countries to ratify an extension. Infact, during the last COP (COP17 held in Durban - which byway I got the chance to represent Kenya as part of the delegation) a new negotiating roadmap - known as the "Durban Platform" - was designed to agree a binding international climate change treaty by 2015 that would come into force at the end of the decade. This is after countries such as Canada pulled out of the Kyoto while Russia, Brazil and India have now opposed both an extension and a treaty!

    These events are occurring during the lead up to the forthcoming Cop18 talks, which are shaping up to most likely NOT produce any meaningful outcome given the lackluster approach by our global leaders and the economic backdrop in both Europe and America is not helping at all. According to Torry Aadvark, a self proclaimed conservative blogger and climmate change skeptic, 'Climate Change has hardly rated or been mentioned in the US Presidential election, as voters go to the polls on November 6th and a Republican win by Mitt Romney will see Climate Change pushed even further off the political agenda.'

    The situation is so dire that even a win by Obama is unlikely improve the situation. This situation leaves us in a conundrum. A serious one...

    Which brings me to my next point, could there be another approach to all of this?! Einstein once defined madness as 'doing the same things expecting different results'. Aren't we going about this climate change agenda down the same rugged path that says 'politics and economics' still have the answers we seek???

    I'd like to hear your thoughts before I offer up a tentative solution...

    warmest regards,


  2. David,

    I agree with you on points, and the lesson has always been that if people go to such conventions and conferences with high hopes, then chances are that they will be pretty disappointed. However, projects that are happening on the ground speak of something different.

    For example, the EU is on its way to realize its Kyoto targets of 20% emission reduction by 2020, and they were even toying with the idea of increasing the target to 30%, although chances are that this is not going to happen.

    Many more mechanisms, mostly market based, as well as low carbon innovations are on the rise. Although the gains made from such conferences are minimal, they are are at least putting the issue on a bigger platform, and more players are keen on addressing the issue on a practical basis.

    Truth be told, it is the Billion Acts of Green that will be the biggest difference. It is disappointing that some countries are refusing to commit to KP2, but then believe that circumstances will compel them to do so along the way, although it may be a tad late.

    The approach should be tweaked to use the successful projects and innovations aimed at reducing Carbon emissions so as to compel the COP, although chances are that they will care less; but they will pay more attention in due time. Trusting them to come up with a silver bullet is a fools errand, honestly.

    I am eager to hear your proposition.