The Kyoto Protocol forms the basis for international agreements on the reduction of greenhouse gas emissions. These agreements are binding in nature.

The Kyoto Protocol allowed emissions trading within and among member states, but made no further specifications. These details followed during the Conference of the Parties in Marrakesh in 2001. Read more about the history of the UNFCCC.

The Kyoto Protocol was created during the 1997 Conference of the Parties in Kyoto and established a legal framework for the reduction of greenhouse gases, including enforceable targets. These targets applied to the ‘Annex-1 countries’ under the Protocol. Annex 1 of the Kyoto Protocol (United Nations Framework Convention on Climate Change, UNFCCC) included all parties under the UNFCCC except the developing nations, such as China, India and Brazil. The Protocol established greenhouse gas emission limits per country, which were derived from the overall target of reducing greenhouse gas emissions by 5% relative to 1990 (the ‘base year’). The aim was to achieve this reduction during the ‘commitment period’, from 2008-2012.

The Kyoto Protocol allowed emissions trading within and among member states, but made no further specifications. These details followed during the Conference of the Parties in Marrakesh in 2001. Read more about the history of the UNFCCC.

Emissions trading under the Kyoto Protocol

Emissions trading under the Kyoto Protocol is also known as trading in ‘flexible mechanisms’ or ‘Kyoto mechanisms’. In fighting global climate change, it makes no difference where emissions are reduced. If cheaper reductions are possible in other countries, it may be more efficient to effect the reductions there. The Kyoto Protocol defines three types of ‘flexible mechanisms’:

  • International Emissions Trading (IET): Trade in emissions units among member states.
  • Joint Implementation (JI): Investments in projects that reduce greenhouse gas emissions in countries with reduction obligations under the Kyoto Protocol.
  • Clean Development Mechanisms (CDM): Investments in projects that reduce greenhouse gas emissions in countries with no reduction obligations under the Kyoto Protocol (usually developing countries).