1. Kyoto Protocol - International agreement linked to the United Nations Framework Convention on Climate Change •Sets quantified emissions limitation and reduction obligations for Annex-I Parties •Entered into force in 16.02.2005, Members: 189 countries + EU

2. Flexibility mechanisms of the Kyoto Protocol • Why ? • Geographic location of abatement measures is climatically irrelevant • Aim: global cost-effectiveness and reduction of compliance costs • How? • Assigned amounts can be divided up into units(Assigned Amount Units –AAUs) allowing Annex I Parties (38 + EU) to participate in the flexibility mechanisms

3. Eligibility Requirements: • • Annex I Party • • Ratification of Kyoto Protocol • • Compliance • • Methodological and reporting infrastructure in place • • Establishment of designated national entities and registries • • Inventories for accounting the tradable units

4. The mechanisms are: • Clean Development Mechanism (Art. 12) • Joint implementation (Art. 6) • International emissions trading (Art. 17)

5. These mechanisims:- • are the Implementation tools of the protocol • Are aimed at fulfilling parties commitment under article 3 of the protocol (compliance with the Quantified Emissions Reduction Commitment) • They all exhibit elements of “Additionality” (article 6(1)(b), art.12(3)(b) and article 17 envisaged the supplemental nature of the Trading scheme • Are additional to domestic policies and measures • are premised under the principle of Cost-effectiveness • Ensures greater flexibility in discharging parties commitment under the protocol • It is an “Accommodative Mechanism” of the Interest of both Developed and Developing countries

6. Clean Development Mechanism (CDM)Art. 12 Non-Annex I/ Annex I countries Projects • Governments or firms in developed countries can participate in the financing of projects that reduce greenhouse gas (GHG) emissions in developing countries in exchange for emission reduction credits that they can use against their targets under the Kyoto Protocol. • assist non-Annex I Parties in achieving sustainable development and in contributing to the ultimate objective of the Convention, and assist Annex I Parties in achieving compliance with their quantified emission limitation and reduction commitments under Article 3(article 12(2)).

7. A CDM project must provide emission reductions that are additional to what would otherwise have occurred. • The projects must qualify through a rigorous and public registration and issuance process. Approval is given by the Designated National Authority. It is then overseen by the CDM Executive Board, answerable ultimately to the countries that have ratified the Kyoto Protocol. • since 2006 the mechanism has already registered more than 1,650 projects and is anticipated to produce CERs amounting to more than 2.9 billion tones of CO2 equivalent in the first commitment period of the Kyoto Protocol, 2008–2012. 

8. Joint Implementation (article 6) • Aim: ● To offer flexible and cost-efficient means to Annex 1 parties in fulfilling part of their Kyoto commitments • What it entails: ● An Annex 1 party may implement an emission- reducing project or a project that enhances removals by sinks (eg. forest protection or reforestation) in another Annex 1 country

9. ● These generate Emission Reduction Units (ERUs) that will count toward meeting the Kyoto targets of the party initiating/implementing the project (as defined in Art. 6) • ● Must reduce anthropogenic emissions by sources or enhance removal by sinks additional to what would otherwise have occurred • ● Projects must be approved by the Parties involved (host and initiator/implementor) • ● May only supplement domestic actions for meeting emission reduction commitments • Benefits: • ● Offers flexibity and enables cost-efficient means of partly fulfilling Kyoto commitments • ● Hosts benefits from foreign investment and technology transfer

10. Impact: • Not overly popular – in 2007 transactions under Joint Implementation totaled just $449 mill, representing emission reductions of the equivalent of 41 mill. tonnes of carbon dioxide. This had fallen in 2009 to just US$354 mill, equivalent to 26 mill tonnes of CD - partly attributed to the financial crisis (falling emissions led to less demand and harder to get finance for projects).

11. International emissions trading or carbon trading (article 17) • PURPOSE • Fulfilling parties commitment under article 3 of the protocol (Quantified Emissions Reduction) • ESSENCE • The mechanism is available for those who are not willing or unable to fulfill their emissions reduction commitment either by the CDM or JI package. • It is, therefore, a Residual Mechanism

12. Parties to the protocol who have enough Credit generated either by the Clean Development Mechanism(CER) or the Joint Implementation Mechanism (ERU) having a surplus of same can engage in international Carbon market ; • Whereas those who are not in a position or unwilling to participate either in the CDM or the JI scheme will have the chance to fulfill their commitments under article 3 of the protocol by buying from the market.

13. PARTIES INVOLVED UNDER THE TRANSACTION • Annex B (Developed Countries and those states whose Economies are in Transition like Eastern Europe) • PROBLEMS • The problem with this flexibility mechanism is that, it does not enlist those tradable GHG. Hence, the system is exposed to Arbitrariness • There is no a body/organ/ and means of regulating the Carbon Trading Scheme under the protocol. Thus, Individual states are left with the right to decide on the ‘how to conduct of same’.