Kyoto mechanisms

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Date produced: 03/09/2012

Can Kyoto Annex B Parties that do not take on QELRCs continue to participate in the mechanisms established under the Kyoto Protocol?

 Summary

Kyoto Annex B parties that do not take on QELRCs will not be able to continue to participate in the flexible mechanisms (CDM, JI and ET) established under the KP. It is a prerequisite for eligibility that parties take on QELRCs. Another – less convincing – view is that an additional decision would be required to actively disqualify participating Parties.

Advice

The Kyoto Protocol establishes binding quantified emission limitation or reduction commitments (QELROs or QELRCs) for the period 2008–12. QELRCs are legally binding targets for the limitation or reduction of greenhouse-gas emissions that industrialized countries listed in Annex B to the Kyoto Protocol have accepted. Each of the industrialized country has its own target ranging from an 8% reduction to a 10% increase from the 1990 base year.

Annex B countries must meet their targets primarily through national measures. As an additional means of meeting these targets the Kyoto Protocol also established the Clean Development Mechanism (CDM), Emissions Trading (ET) and Joint Implementation (JI) – the flexible mechanisms. They are market based mechanisms which were expected to reduce the costs of greenhouse-gas emissions cuts, encourage private sector involvement and stimulate sustainable development.

To participate in the flexible mechanisms, Parties must meet the relevant eligibility criteria.

Decisions 3, 9 and 11 of the first Meeting of the Parties to the Kyoto Protocol (CMP.1) established certain eligibility criteria for Annex I Parties to participate in the flexible mechanisms. Amongst other things, they must have calculated their assigned amount in accordance with Decision 13/CMP.1. For this amount to be determined, the Annex I Party must be a Party to the Kyoto Protocol and have a commitment inscribed in Annex B to the Protocol.

Thus, if the eligibility to the flexible mechanisms during the second commitment period operates in the same way as for the first, any Annex I Party not taking on commitments during the second commitment period will be ineligible to participate in the flexible mechanisms.

However, the rules also provide that “[a] Party included in Annex I with a commitment inscribed in Annex B shall be considered… [t]o continue to meet the eligibility requirements referred to … above unless and until the enforcement branch of the Compliance Committee decides that the Party does not meet one or more of the eligibility requirements, has suspended the Party’s eligibility, and has transmitted this information to the secretariat.”

The provision essentially states that unless a decision to the contrary is taken the eligibility to participation in the flexible mechanism is presumed to continue. If the eligibility criteria to join the scheme have been met during the first commitment period, it subsequently requires positive action by the enforcement branch of the Compliance Committee to disqualify a Party from further participation. Consequently, Parties that do not renew their QELRC under the Kyoto Protocol may remain – pending such action – eligible to continue participation in the flexible mechanisms.

However, the Kyoto Protocol (and the subsequent decisions of the Meetings of the Parties) envisages that QELRCs are inscribed in Annex B to the Protocol. Parties that do not take on new QELRCs would, following an amendment to or adoption of a new Annex B, no longer have “a commitment inscribed in Annex B” (above) as required to potentially consider them eligible (until a decision to the contrary is taken). The legal presumption (“shall be considered” under (b) of the respective paragraph) would not apply, and a decision of the enforcement branch of the Compliance Committee not be needed.

The interpretation of decisions by the Parties to a multilateral environmental agreement needs to reflect the rules and principles of the governing legal instrument. The latter interpretation – that QELRCs are required for participation in the Kyoto Protocol’s mechanisms – therefore appears to be more in line with the overall structure and objectives of the Protocol.

With regard to Annex B Parties, JI (Kyoto Protocol, Art.6) and ET (Art.17) were created “for the purpose of meeting its commitments under Article 3” or “for the purposes of fulfilling their commitments under Article 3”, respectively. The primary commitment under Art.3 is to ensure that their greenhouse gas emissions do not exceed their assigned amounts. The amounts are “calculated pursuant to their QELRC inscribed in Annex B”. Although some assigned amounts (or assigned amount units – AAUs) from the first commitment period may be carried over, medium term participation in the flexible mechanisms appear to be contingent on existing QELRCs.

The purpose of the CDM (Art.12) is “to assist Parties included in Annex I in achieving compliance with their quantified emission limitation and reduction commitments under Article 3”. This equally suggests the need for participating Parties to have a QELRC.