The Kyoto Mechanisms
Here is an explanation of the three market-based
mechanisms aimed at achieving reductions as cost-effective
ly as possible:
International Emissions Trading (IET)
– country level trading of credits
– countries with emissions limitation commitments can transfer part of their allowed emissions from one country to another, keeping total allowable emissions constant
ex. Transfer of part of its assigned amount by the Russian Federation to the governmentt of Japan
Joint Implementation (JI)
– project level trading of credits
– allows companies or countries with emissions limitation commitments to fund specific emission reduction projects in other developed countries, and to “credit” the resulting emission reductions against their own obligations
ex. Investment by a U.S. firm in the Czech Republic to switch from coal to natural gas and to improve efficiency of the system could be a JI project
Clean Development Mechanism (CDM)
– project level trading of credits, for non Annex I countries
– companies or countries can fund specific emission reduction projects that contribute to sustainable development in developing countries and credit resulting reductions against their own obligations
ex. Investment by government of The Netherlands to improve the efficiency of a re-heat funace in a steel plant in Thailand
Trading of emissions credits is somewhat controversial. While the goal is to increase efficiency by allowing emissions reductions to take place where they are least costly, some nations claim that traiding could allow wealthy states to accomplish a large portion of their reductions without making any changes in lifestyle. Another point of contention are emissions credits trading with Russia, whose emission level goals were set prior to the nation's economic collapse. Their emissions levels have already been met as a result of economic downturn rather than consciencious emissions reductions. Trading is also difficult to monitor and verify.
Haites, E. and M. Aslam. The Kyoto Mechanisms & Global Climate Change: Coordination Issues and Domestic Policies. Pew Center on Global Climate Change. 2000.
Porter, G., J.W. Brown and P.S. Chasek. Global Environmental Politics. Westview Press. 2000.