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Emissions
Trading (ET) - (Article 17, Kyoto Protocol)
Emissions Trading (ET) is the only administrative based mechanism
of the three Kyoto mechanisms;
Joint Implementation
(JI) and
Clean Development Mechanism
(CDM) are both project based.
Under ET, countries
are allowed to transfer parts of their allowed emissions (assigned
amount units, or AAUs). An annex I country can acquire units from
another annex I party and use the acquired units towards meeting her
emissions targets under the Kyoto protocol.
For
instance, an annex
I nation (with emission commitment as stipulated in annex B of the Kyoto Protocol) that
has met and exceeded her emission reduction target, can sell
units to another annex I country (also with emission commitment
recommended in annex B of
Kyoto Protocol) and has not met her emission target.
Emissions trading is sometimes referred to
as Cap and Trade System. The goal of the Kyoto Protocol
is to lower the overall emissions of the greenhouse gases
by developed countries (Annex I countries), calculated as an average, over
the five-year period of 2008-12 (which is the first commitment period) by
5.2 percent of 1990 levels (Cap). Different developed countries agreed to
different targets (emission levels) - see Annex B of the Kyoto Protocol.
For instance, the United States and Canada, respectively agreed to 7% and
6% below their 1990 GHG emission levels (i.e. US's emission level should
be at 93%, while Canada's emission level should be 94% of their respective
1990 emission levels by the end of the first commitment period of the
Kyoto Protocol). Under the ET Trading (or Cap and Trade) system, these
countries are assigned Allowances (or credits), which permit them
to pollute to their committed emission levels. If US pollutes more and
exceed her emission level, she can buy allowances (credits) that allow her
to pollute more from Canada (Trading).
Only Annex I
Parties to the Kyoto Protocol with emission limitation and reduction
commitments prescribed in Annex B to the Kyoto Protocol may participate in
emission trading.
The units
which may be transferred under emissions trading, each equal to one metric
tonne of emissions (in CO2-equivalent terms), may be in the
form of:
-
An
assigned amount unit (AAU) issued by an Annex I Party on the basis of
its assigned amount.
-
A removal
unit (RMU) issued by an Annex I Party on the basis of land use, land-use
change and forestry (LULUCF) activities under Articles 3.3 and 3.4 of
the Kyoto Protocol.
-
An
emission reduction unit (ERU) generated by a joint implementation
project under Article 6 of the Kyoto Protocol.
-
A
certified emission reduction (CER) generated from a clean development
mechanism project activity under Article 12 of the Kyoto Protocol.
Transfers
and acquisitions of these units are to be tracked and recorded through the
registry systems under the Kyoto Protocol. These include a national
registry to be established and maintained by each Annex I Party.
Cap and Trade at National and Organizational
Levels
Parties may
also authorize legal entities (e.g. businesses, non-governmental
organizations and other entities) to participate, under their
responsibility, in emissions trading. Accounts may be created in national
registries to provide for such participation by legal entities.
A
nation (e.g. Switzerland) may specify a CAP (emission target) and divide
the CAP on its industries or individuals. An industry or organization that
has polluted beyond assigned emission target can purchase credits (that
allows further pollution) from industries or organizations that are
polluting below their set targets.
Further information can be obtained from:
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