Greenhouse gas emissions must be reduced in order to combat global climate change. The countries where these emissions are lowered does not matter. If this can be achieved outside the Netherlands at lower costs, it may be more efficient to reduce emissions abroad.
The Kyoto Protocol (KP) has taken this into consideration and, in addition to trading in KP units, also offers two project-related mechanisms:
- the Joint Implementation (JI) mechanism: investment in a project which will reduce greenhouse gas emissions in a country which has a KP emissions reduction obligation;
- the Clean Development Mechanism, CDM): investment in a project which will reduce greenhouse gas emissions in a country which has no KP emissions reduction obligation (these are usually developing countries).
With effect from 1 January 2013 the Dutch Emissions Authority (NEa) has responsibility for granting written consent on behalf of the Netherlands for participation in CDM and JI projects.
The possibility to make use of the CDM and JI projects will end in 2020 (Kyoto-Protocol ends). The new Paris Agreement on climate change which will enter into force from 2020 also involves market mechanisms, although it is not yet clear how these will be implemented.