The Registry Of Nature Habitats

The Kyoto Protocol is an agreement made under the United Nations Framework Convention on Climate Change (UNFCCC). Countries that ratify this protocol commit to reduce their emissions of carbon dioxide and five other greenhouse gases, or engage in emissions trading if they maintain or increase emissions of these gases.

The Kyoto Protocol now covers more than 160 countries globally and over 55% of global greenhouse gas (GHG) emissions.

· Kyoto is underwritten by governments and is governed by global legislation enacted under the UN's aegis

· Governments are separated into two general categories: developed countries, referred to as Annex 1 countries (who have accepted GHG emission reduction obligations); and developing countries, referred to as Non-Annex 1 countries (who have no GHG emission reduction obligations)

· Any Annex 1 country that fails to meet its Kyoto target will be penalized by having its reduction targets decreased by 30% in the next period.

· By 2008-2012, Annex 1 countries have to reduce their GHG emissions by around 5% below their 1990 levels (for many countries, such as the EU member states, this corresponds to some 15% below their expected GHG emissions in 2008)

· Kyoto includes "flexible mechanisms" which allow Annex 1 economies to meet their GHG targets by purchasing GHG emission reductions from elsewhere. These can be bought either from financial exchanges (such as the new EU Emissions Trading Scheme) or from projects which reduce emissions in non-Annex 1 economies under the Clean Development Mechanism (CDM), or in other Annex-1 countries under the JI.

· Only CDM Executive Board-accredited Certified Emission Reductions (CER) can be bought and sold in this manner. Under the aegis of the UN, Kyoto established this Bonn-based Clean Development Mechanism Executive Board to assess and approve projects (“CDM Projects”) in Non-Annex 1 economies prior to awarding CERs. (A similar scheme called “Joint Implementation” or “JI” applies in transitional economies mainly covering the former Soviet Union and Eastern Europe).

What this means in practice is that Non-Annex 1 economies can continue to pollute the environment without reprimand, but when a GHG emission reduction project (a “GHG Project”) is implemented in these countries, that GHG Project will receive Carbon Credits which can be sold to Annex 1 buyers.

· the cost of complying with Kyoto is prohibitive for many Annex 1 countries (especially those countries, such as Japan or the Netherlands for example, with highly efficient, low GHG polluting industries, and high prevailing environmental standards). Kyoto therefore allows these countries to purchase Carbon Credits instead of reducing GHG emissions domestically; and,

· this is seen as a means of encouraging Non-Annex 1 developing economies to reduce GHG emissions since doing so is now economically viable because of the sale of Carbon Credits.

All the Annex 1 economies have established Designated National Authorities to manage their GHG portfolios under Kyoto. Countries including Japan, Canada, Italy, the Netherlands, Germany, France, Spain and many more, are actively promoting government carbon funds and supporting multilateral carbon funds intent on purchasing Carbon Credits from Non-Annex 1 countries. These government organizations are working closely with their major utility, energy, oil & gas and chemicals conglomerates to try to acquire as many GHG Certificates as cheaply as possible.

Virtually all of the Non-Annex 1 countries have also set up their own Designated National Authorities to manage the Kyoto process (and specifically the “CDM process” whereby these host government entities decide which GHG Projects they do or do not wish to support for accreditation by the CDM Executive Board).

The objectives of these opposing groups are quite different. Annex 1 entities want Carbon Credits as cheaply as possible, while Non-Annex 1 entities want to maximize the value of Carbon Credits generated from their domestic GHG Projects.