The Kyoto Protocol establishes clear targets for reducing GHG emissions, along with accounting mechanisms that encourage nations to undertake projects that reduce emissions. It balances national economic development plans with emissions reductions and sets up free market mechanisms to achieve the targets set by intergovernmental negotiations.

By the early 1990's, anthropogenic emissions had been identified as a significant contributor to the concentrations of greenhouse gases (GHGs) in the atmosphere and to climate changes. Such GHG emissions are generated by industrial activities, especially the burning of fossil fuels for energy, as well as agricultural processes in both developing and industrial nations. Thus, the United Nations sponsored the framing of the U.N. Framework Convention on Climate Change in 1992 and the Kyoto Protocol to the UNFCCC in 1997 to address and mitigate the generation of GHGs by the signatories to those treaties.

On a per capita basis, the industrialized nations are by far the more intense of the world's emitters. The per capita carbon footprint, or the number of metric tons of carbon dioxide (CO2) or other equivalent GHG emissions per year per person, is a useful metric for comparing national emissions. The per capita carbon footprint of the United States, for example, is around 18 metric tons, while Australia's is 25.5 metric tons. The world average is around 2.8 metric tons, China's is 2.4 metric tons and India's is 0.87 metric ton.

When the world's nations began negotiating a response to the perceived threat represented by anthropogenic GHG emissions, it was soon decided that the brunt of the effort would have to be borne by industrialized nations. This decision was not without controversy, but most parties to the negotiations believed that developing nations could not incur the costs of cutting emissions. It was argued that the industrialized nations, which were largely responsible for the rise in GHG concentrations, could not expect developing nations to curtail their attempts to improve their own people's standards of living by industrializing, nor could industrialized nations disavow their own primary responsibility for rising GHG levels and therefore their obligation to make amends. As a result of this decision, the United Nations Framework Convention on Climate Change (UNFCCC) divided its parties into Annex I (industrialized) nations and non-Annex I (developing) nations.

Annex I of the UNFCCC not only lists the industrialized parties to the convention but also commits them to reducing their GHG emissions by a specified date. It was left to the successor document, the Kyoto Protocol, to determine the details for each nation. That document spelled out the obligations of each party nation, as well as the specific accounting mechanisms that would be used both to measure a nation's progress toward reducing its emissions and to assign credits in lieu of actual reductions for certain complementary activities.

To meet the overall target of a 5.2 percent reduction in global GHG emissions from 1990 to 2012, the mandated reductions for individual nations are as large as an 8 percent reduction from the nation's 1990 emissions level (Douma, 2007). Some nations, including Australia, negotiated allowances for a rapid rate of growth and were allowed to increase their emissions by as much as 10 percent over their 1990 levels. They could also sell any unused portion of that quota as credits to other nations unable to meet their own reduction quotas. Countries set up national registries validated by the UNFCCC to monitor their emissions.

Each signatory to the Kyoto Protocol undertook to adopt policy measures to enhance energy efficiency; protect and enhance sinks and reservoirs of GHGs; and promote forest cover, sustainable forms of agriculture, and research on renewable energy and sequestration technologies. The signatories agreed progressively to remove policies and other incentives that support or encourage GHG emissions; to reduce emissions in the transport sector; and to reduce methane emissions through recovery and use in waste management. Emissions were also to be reduced in the production, transport, and distribution of energy.

The specific gases covered by the Kyoto Protocol are listed in Annex A of the protocol. They are carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6). The contribution of each gas to the greenhouse effect is converted to that of an equivalent amount of CO2 for easy comparison. This standardized measure of a GHG's climatic effects is known as its global warming potential. Methane, for example, has a global warming potential of 20, meaning it is twenty times as potent per unit mass as CO2 over a specific time horizon.

GHG emissions arise from fuel combustion, energy industries, manufacturing industries, construction, and transportation. High-value targets for reduction include fugitive emissions from stored fuels, such as oil and natural gas; industrial processes in the metal and chemical industry, such as solvent and other product use; and direct production of halocarbons and sulfur hexafluoride. In agriculture, enteric fermentation, manure management, rice cultivation, prescribed burning of savannas, field burning of agricultural residues, waste incineration, and wastewater handling are all targeted activities.

The parties included in Annex I of the UNFCCC are Australia, Austria, Belgium, Canada, Denmark, the European Community, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Liechtenstein, Luxembourg, Monaco, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom, and the United States (Fletcher, 2005). Countries listed in Annex I as undergoing transitions to market economies are Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, the Russian Federation, Slovakia, Slovenia, and Ukraine. Annex I nations have agreed to limit or reduce GHG emissions from aviation and marine bunker fuels and to ensure that their aggregate anthropogenic emissions of the GHGs listed in Annex A of the protocol do not exceed their assigned amounts. Each party included in Annex I was to have made demonstrable progress by 2005 in achieving its commitments under the protocol.

The Kyoto Protocol did not institute taxes on carbon emissions. Instead, it created a system of credits and trading as the favored mechanism to reduce GHG emissions. By turning emissions into tradeable market commodities, the protocol enabled businesses to better manage their emission reduction strategies. The carbon market sets pricing, and market growth is driven by investors. Using flexible mechanisms, the Kyoto Protocol ensures that investments contribute to genuine, sustainable carbon reduction schemes.

One certified emissions reduction (CER) unit, also known as one carbon credit, is equivalent to 1 metric ton of equivalent reduction in CO2 emissions. CERs can be sold privately or in the international market. Each international transfer is validated by the UNFCCC. The European Commission also validates each transfer of ownership within the European Union. Climate exchanges provide a spot market in allowances, as well as futures and options markets, to discover the market price and maintain liquidity.

Trading in CERs is done through at least four exchanges: the Chicago Climate Exchange, the European Climate Exchange, Nord Pool, and Power- Next. The carbon market has exceeded 60 billion euros and is projected to grow beyond 1 trillion euros within a decade. As the need to meet national quotas intensifies, the value of CERs may rise, encouraging more investment in generating new CERs. Speculation and derivatives trading in the value of CERs contributes to rising market activity. Annex I countries earn CERs for financing projects in less developed countries, including projects started ahead of the Kyoto trading period. Under the clean development mechanism (CDM), a developed country can sponsor a GHG reduction project in a developing country, where the cost of GHG reduction activities is usually much lower than it is in the developed country itself. The CDM is administered through an executive board, based in Bonn, Germany.

Joint implementation refers to CDM projects implemented by Annex I countries with the transitional economies of Eastern Europe and the Balkans. Carbon projects can be created by a national government or by an operator within the country. Under international emissions trading, countries can trade in the international carbon credit market to cover their shortfall in allowances.

A 4 percent reduction in GHG emissions had been achieved overall by 2004. Large reductions came from former Soviet states that were transitioning to market economies. As of May, 2008, 182 countries had ratified the Kyoto Protocol, representing 61.6 percent of global emissions of GHGs. The United States and Kazakhstan had signed but not yet ratified the treaty. Afghanistan, Andorra, Brunei, Chad, Iraq, the Palestinian Authority, the Sahrawi Arab Democratic Republic, San Marino, Somalia, Taiwan, Tajikistan, Vatican City, and Zimbabwe had not expressed any position.

In 1997, the U.S. Senate voted 95-0 against ratifying the Kyoto Protocol unless several conditions were met. The vote reflected lawmakers' concerns that American manufacturing would be severely affected by the costs of compliance, at a time when strong economic growth was driving emissions up. There was, moreover, widespread skepticism about the claims regarding anthropogenic global warming.

The government took the position that since China and India, whose overall emissions are large despite very low per capita emission levels, were not subject to reduction requirements, the United States should not participate in the agreement. On March 29, 2001, President George W. Bush withdrew the United States from the Kyoto Protocol. By 2004, the country had showed a 15.8 percent rise in emissions, against the target of a 7 percent reduction. Early studies projected a 4.2 percent drop in U.S. gross domestic product (GDP) if Kyoto requirements were met. Subsequent studies have projected far lower effects.

The U.S. approach at the beginning of the twenty-first century focused on using federal tax credits to encourage reduction in GHG emissions, accompanied by a phase-out of the most harmful products such as chlorofluorocarbons. Several states adopted so-called Green Tags, or renewable energy certificates. A renewable energy certificate is earned for each 1,000 kilowatt-hours of electrical energy produced from renewable sources. Some large renewable energy projects, such as wind farms on Native American reservations, have been funded partially through the sale of long-term rights to Green Tags. Green Tags can be used by corporations to reduce their net emissions profile.

A sharp rise in fossil energy prices beginning in 2004 created new market realities in the United States. Nuclear energy, which despite its other problems is a clean source from the GHG perspective, seemed poised for a comeback, along with an increased push toward renewable energy. Coupled with the drive toward efficiency in using costlier fossil fuels, the United States was moving along the path needed to bring GHG emissions down.

The ambitious aspiration of the Kyoto Protocol is to hold anthropogenic emissions of GHGs at the levels of 1990, as the world economy grows. The technological and policy improvements required to achieve this goal imply dramatic changes in the way the world operates. Fundamentally, the emission of waste heat and hot gases implies thermodynamic inefficiency. The Kyoto Protocol provides the urgent motivation, means for accurate accounting, and substantial funding to improve efficiencies, which in turn reduces the need for energy. Energy efficiency, as a cost-saving rather than a cost-inducing measure, is also more likely to gain favor among industrialized nations and businesses doubtful of their ability to compete globally while reducing GHG emissions. As the nations of the world begin to negotiate the successor treaty to the Kyoto Protocol, a new sense of urgency combined with a new belief that green technologies may become an economic growth sector may make the next treaty negotiated under the UNFCCC more successful than the Kyoto Protocol has been.

References

1. Douma, W. Th., L. Massai, and M. Montini, eds. The Kyoto Protocol and Beyond: Legal and Policy Challenges of Climate Change. West Nyack, N.Y.: Cambridge University Press, 2007.

2. Fletcher, S. R. Global Climate Change: The Kyoto Protocol. Washington, D.C.: Congressional Research Service, 2005.

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