The Mechanisms under the Kyoto Protocol

Background:

Countries with commitments under the Kyoto Protocol to limit or reduce greenhouse gas emissions must meet their targets primarily through national measures. As an additional means of meeting these targets, the Kyoto Protocol introduced three market-based mechanisms, thereby creating what is now known as the “carbon market.”

The Kyoto mechanisms are:

Emissions Trading

The Clean Development Mechanism (CDM)

Joint Implementation (JI)

The Kyoto mechanisms:

Stimulate sustainable development through technology transfer and investment Help countries with Kyoto commitments to meet their targets by reducing emissions or removing carbon from the atmosphere in other countries in a cost-effective way Encourage the private sector and developing countries to contribute to emission reduction efforts

JI and CDM are the two project-based mechanisms which feed the carbon market. JI enables industrialized countries to carry out joint implementation projects with other developed countries, while the CDM involves investment in sustainable development projects that reduce emissions in developing countries.

The carbon market is a key tool for reducing emissions worldwide. It was worth US$30 billion in 2006 and is growing.

Annex I Parties must provide information in their national communications under the Protocol to demonstrate that their use of the mechanisms is “supplemental to domestic action” to achieve their targets. This information is assessed by the facilitative branch of the Compliance Committee