emission

contents

key points

introduction

common principles

key points

annex 1 Parties must meet the majority of their commitments through domestic, verifiable emission reductions in line with the terms of the Protocol, which require, that emission trading and joint implementation shall be supplemental to domestic actions.

To ensure that the use of flexible mechanisms is supplemental to domestic action, there must be a limit or cap on their total use to no more than 20% of a Parties’ target for the first commitment period based on 1990 emission levels.

Effective monitoring, verification and a strong non-compliance regime are essential to ensure credibility of the flexible mechanisms as tools to reduce greenhouse gas emissions.

Sinks must not be included in trading, at least until the IPCC special assessment report on Land Use Change and Forestry is complete.

INTRODUCTION

Friends of the Earth International (FoEI) urges the Conference of Parties to recognise and work to safeguard against the large potential loopholes created by the flexible mechanisms in the Kyoto Protocol, which if exploited, will undermine the objectives of both the Protocol and the Framework Convention on Climate Change. This paper presents FoEI’s position on emissions trading and joint implementation. The Clean Development Mechanism is discussed separately.

Transfers of assigned amounts between Annex B Parties can take place via emissions trading under Article 17 and the sale and acquisition of emission reduction units (ERUs) from joint implementation projects under Article 6. It is essential that COP 4 in Buenos Aires begins to define robust rules and principles for these flexible mechanisms in advance of their implementation, in order to ensure their integrity as tools to cost-effectively reduce atmospheric greenhouse gases. These rules should be developed in parallel, and there are common principles that must be applied to the operation of both of these instruments.

COMMON PRINCIPLES

The majority of emissions reductions must be achieved through domestic, verifiable emission reductions in line with the terms of the Protocol, which require, that emission trading and joint implementation shall be supplemental to domestic actions. It is essential to provide a clear signal to begin redirecting investments to environmentally sustainable technology, e.g. energy from renewable sources and provision of energy efficiency services. Such a shift in the way energy is generated and used is necessary because the next commitment period will need to have much steeper reduction targets to protect the atmosphere, as it is clear that a reduction of 5% by Annex 1 countries will be inadequate to meet the objectives of the Convention.

To ensure that the use of flexible mechanisms is supplemental to domestic action, there must be a limit or cap on their total use by Annex B Parties to no more than 20% of a Parties’ target for the first commitment period based on 1990 emission levels. This would restrict trading of "hot air" from countries in transition with only stabilisation targets in the Protocol and "tropical hot air" from developing countries if the trading system is ever enlarged to non-Annex 1 countries.

Parties must begin to define principles, rules, modalities and guidelines for the flexible mechanisms at COP 4, which ensure the achievement of real emission reductions and reinforce the environmental objectives of the Protocol. These principles, modalities, rules and guidelines must be transparent, accessible and verifiable and be in place before trading begins. Monitoring and verification are essential to ensure the credibility of the Protocol. In order to ensure their integrity, these must be supported with a strong and effective non-compliance regime under Article 18, with a system of joint buyer/seller liability. The framework for the flexible mechanisms must be developed in parallel and be consistent with each other.

There must be compliance with the provisions of Article 10 on emission inventories and national programs to mitigate climate change. Annex 1 Parties must comply with Articles 5 and 7, i.e. they must have an independently verified national inventory system in place that allows for accurately measuring, tracking, reporting and monitoring domestic emissions annually. Only sources which are verifiable should be traded, e.g. CO ₂ from energy. This should probably be restricted initially to CO ₂ outputs from fossil fuel power stations, which are relatively simple to monitor.

Joint implementation projects must result in emissions reductions or removals that are absolutely additional to any that would otherwise occur.

Sinks must not be included in trading, at least until the IPCC special assessment report on Land Use and Forestry is complete, its results have been considered by SBSTA and decisions taken by COP/MOP.

National accounting systems should be established to register acquisitions and transfers of assigned amounts. Sufficient details should be included so that acquisitions can be traced back to individual projects or trading Parties. Information provided by Parties should be accessible, transparent and widely available, including electronically. There should be a central register of projects and trades.

The flexibility mechanisms provide opportunities for "carbon brokers". These brokers must be accredited through internationally-agreed procedures and there must be penalties for fraudulent activities.

The effectiveness of each of the flexibility mechanisms must be reviewed after the first commitment period by independent experts. There should be annual reporting on trading and JI projects.

© Friends of the Earth International, October 1998

Contact Details:
Friends of the Earth Climate Campaign
Press Office
Tel: +44-171-5661649
Web site: www.foe.co.uk/climatechange