2.3 The Kyoto Protocol

At COP-3, the Kyoto Protocol (KP) to the FCCC was adopted. The KP aims to reduce emissions of Annex I countries (slightly modified in a new Annex B (see Table 4)) by at least 5% below 1990 levels (and in some cases 1995 levels) in the period 2008-2012. Individually, these countries have separate commitments. The European Union countries are collectively expected to reduce their emissions by 8%, the USA by 7% and Japan by 6%. Australia, Iceland and Norway are allowed to increase their emissions. The remaining countries are allowed varying levels of reduction. Although an important first step, it falls short of what is needed to stabilize global concentrations of GHGs.

The Protocol identifies policies and measures that can be taken by countries (Art. 2) and quantified commitments for Annex B countries on six GHGs (Art. 3; see Section 1.1), and reiterates other commitments (Art.10). Countries need to communicate their measures (Art. 7) and these are then reviewed (Art. 8). There are also articles on definitions, methodologies, non-compliance, dispute resolution, amendments, annexes, voting, depository, signature and ratification, entry into force, reservations and withdrawals.

The 1997 Kyoto Protocol allows joint implementation (JI ­ Art. 6; see Box 1) with crediting among the developed country Parties. It establishes a Clean Development Mechanism (CDM ­ Art. 12) which aims at enabling projects in developing countries to achieve sustainable development, contribute to the ultimate objective of the Convention and assist developed countries in complying with their quantified emission reduction and limitation commitments. Under the Protocol, countries with commitments are also allowed to participate in emission trading (ET ­ Art. 17) among themselves. Such schemes call for the division of a budget of permissible emissions among countries. Those countries that do not use their complete share may sell the unused portion to those who need them. In the KP, the assigned amounts (or quotas) have been allocated to the developed countries and the quotas are equivalent to their emission reduction commitments. The underlying rationale of these co-operative mechanisms is to ensure that global emissions of greenhouse gases are reduced in a cost-effective manner in line with the principles in Article 3 of the FCCC.

The KP has many "loopholes" in that it includes variable base years, flexibility mechanisms (namely JI, CDM and ET) and sinks. The combined effect of these loopholes could inflate the target of -5% to such an extent as to render the actual impact insignificant. This is why there is considerable pressure in the post-Kyoto period to actually determine the modalities and processes so as to minimize the potential use of loopholes. The KP has yet to enter into force as only 29 developing countries have ratified it thus far (see Table 3). The United States has stated that ratification will depend on "meaningful participation" by key developing countries, and initially the European Union countries and other developed countries were unwilling to ratify, except simultaneously with the U.S. However, the EU is now trying to lobby for ratification.

At the next Conference of the Parties in November 2000 (COP-6), it is expected that flexibility mechanisms will be the key issue.

Box 1. Negotiation from Joint Implementation to the Clean Development Mechanism

The FCCC does not define the concept "joint implementation." As such only the literal English language meaning is of relevance. Lawyers may be tempted to look at the preparatory documents and argue that joint implementation implies investment in developing (and other) countries in return for emission reduction credits. However, the developing countries had never explicitly agreed to this. The issue was heavily discussed and finally, in 1995, the developing countries agreed to accept a pilot phase on Activities Implemented Jointly, which would be voluntary in nature and without credits. This implied that the pilot phase would at some time be reviewed extensively and a full-fledged system would be set in place. In the meanwhile, many of the large developing countries, including Brazil, had made their objections to Joint Implementation known. In 1997, Brazil proposed a Clean Development Fund (CDF) on the basis of the polluter pays principle. The CDF, funded by fines paid by countries in non-compliance, would finance emission limitation and adaptation measures. During the negotiations, the non-compliance elements were removed from the CDF since none of the developed countries were interested in such a fine. "The side-tracking of compliance led the contact groups on a clean development fund to focus instead on the role such a mechanism might play in facilitating project based joint implementation" (Werksman 1998: 152; cf. Aslam 1998). Joint Implementation had been on the agenda for a long time but because of the reservations of the developing countries, discussions were flagging on this issue. And then suddenly at Kyoto, the Clean Development Mechanism (CDM)‹the big "Kyoto surprise" was adopted.